As Filed with the Securities and Exchange Commission on March 1, 2016
Registration No. 333-208584
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM F-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
Azure Power Global Limited
(Exact name of Registrant as specified in its Constitution)
Mauritius | 4931 | Not Applicable | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
Inderpreet Singh Wadhwa
Chief Executive Officer
8 Local Shopping Complex
Pushp Vihar, Madangir, New Delhi 110062, India
Telephone: (91-11) 49409800
(Address, including zip code, and telephone number, including area code, of Registrants principal executive offices)
CT Corporation System
111 Eighth Avenue, 13 th Floor, New York, NY 10011
Telephone: (212) 894-8940
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Thomas J. Ivey, Esq. Andrea Nicolas, Esq. Rajeev Duggal, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue #1400 Palo Alto, CA 94301 |
Kirk A. Davenport II, Esq. Wesley C. Holmes, Esq. Latham & Watkins LLP 885 Third Avenue New York, NY 10022 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
CALCULATION OF REGISTRATION FEE
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Title of each class of
securities to be registered |
Proposed
maximum
offering price(1)(2) |
Amount of
registration fee(3) |
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Equity shares, par value US$0.01 per equity share |
US$ 100,000,000 | US$ 10,070 | ||
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(1) | Includes (a) all equity shares that may be purchased by the underwriters pursuant to an over-allotment option, and (b) all equity shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this Registration Statement and the date the equity shares are first bona fide offered to the public. The equity shares are not being registered for the purpose of sales outside the United States. |
(2) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933. |
(3) | Previously paid. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said Section 8(a) may determine.
The information in this prospectus is not complete and may be changed. Neither we nor the selling shareholder may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
Subject to Completion, dated March 1, 2016
PROSPECTUS
Equity Shares
Azure Power Global Limited
This is the initial public offering of the equity shares of Azure Power Global Limited. We are offering equity shares and the selling shareholder identified in this prospectus is offering equity shares. We will not receive any of the proceeds from the sale of the shares by the selling shareholder. No public market currently exists for our equity shares.
We have applied to list our equity shares on the New York Stock Exchange under the symbol AZRE.
We anticipate that the initial public offering price will be between US$ and US$ per equity share.
We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements.
Investing in our equity shares involves risks. See Risk Factors beginning on page 18 of this prospectus.
Per Share | Total | |||||||
Price to the public |
US$ | US$ | ||||||
Underwriting discounts and commissions(1) |
US$ | US$ | ||||||
Proceeds to us (before expenses) |
US$ | US$ | ||||||
Proceeds to the selling shareholder (before expenses) |
US$ | US$ |
(1) | We refer you to Underwriting beginning on page 171 of this prospectus for additional information regarding total underwriter compensation. |
We have granted the underwriters the option to purchase additional equity shares on the same terms and conditions set forth above if the underwriters sell more than equity shares in this offering.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the equity shares on or about , 2016.
Barclays
Prospectus dated , 2016
Azure Power
Indias first private grid
connected MW Solar Plant
Largest owner & operator of NSM projects
Pan-India portfolio of solar assets in 14 states
Indias First
distributed MW scale rooftop solar project
Commited & Under Construction
Operating
Solar Resource (KWh/m2/Day)
0 .3 .6 .9 1.2 1.5
Land Area (Million km2)
Azure Power
POWERING
UTILITIES
-Developed Indias first utility scale solar project in 2009
-21 operational utility scale projects
-Integrated project development, EPC,
financing, O&M services
POWERING COMMERCIAL
-First distributed solar
rooftop project operational in india
-500+ rooftop covered across the country
-solar tariffs in most states are already at grid parity
COMMUNITY ENGAGEMENT
-We hire from local communities
-lease land that has few alterative uses
-provide a stream of discretionary cash flow without displacing alternative businesses
555 KW, INDUSTRIAL ROOFTOP SOLAR PLANT, CHEAPER THAN GRID POWER
100 MW, LARGEST OPERATING
PROJECT UNDER NATIONAL SOLAR MISSION
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F-1 |
You should rely only on the information contained in this prospectus and any related free-writing prospectus that we authorize to be distributed to you. We and the selling shareholder have not, and the underwriters have not, authorized any person to provide you with information different from that contained in this prospectus or any related free-writing prospectus that we authorize to be distributed to you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus speaks only as of the date of this prospectus unless the information specifically indicates that another date applies, regardless of the time of delivery of this prospectus or of any sale of the securities offered hereby.
No action is being taken in any jurisdiction outside the United States to permit a public offering of the equity shares or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of the prospectus applicable to that jurisdiction.
STATISTICAL AND OTHER INDUSTRY AND MARKET DATA
This prospectus includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.
We have rights to trademarks and trade names that we use in connection with the operation of our business, including our corporate name, logos, product names and website names. Other trademarks and trade names appearing in this prospectus are the property of their respective owners. Solely for your convenience, some of the trademarks and trade names referred to in this prospectus are listed without the ® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks and trade names.
CONVENTIONS THAT APPLY TO THIS PROSPECTUS
Except where the context requires otherwise and for purposes of this prospectus only:
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Azure Power Global, we, us or our refer to Azure Power Global Limited, together with its subsidiaries (including Azure Power India Private Limited, or AZI, its predecessor and current subsidiary). |
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Our holding company refers to Azure Power Global Limited on a standalone basis. |
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GAAP refers to the Generally Accepted Accounting Principles in the United States. |
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US$ or U.S. dollars refers to the legal currency of the United States. |
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Rs., rupees or Indian rupees refers to the legal currency of India. |
In this prospectus, references to U.S. or the United States are to the United States of America, its territories and its possessions. References to India are to the Republic of India, and references to Mauritius are to the Republic of Mauritius.
Unless otherwise indicated, the consolidated financial statements and related notes included in this prospectus have been presented in Indian rupees and prepared in accordance with GAAP. References to a particular fiscal year are to our fiscal year ended March 31 of that year, which is typical in our industry and in the jurisdictions in which we operate. Our fiscal quarters end on June 30, September 30, December 31 and March 31. References generally to a fiscal year refer to the Indian fiscal year ended March 31 of the respective period.
This prospectus contains translations of certain Indian rupee amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise stated, the translation of Indian rupees into U.S. dollars has been made at Rs. 66.19 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2015, which is the date of our last reported financial statements. We make no representation that the Indian rupee or U.S. dollar amounts referred to in this prospectus could have been converted into U.S. dollars or Indian rupees, as the case may be, at any particular rate or at all.
As used in this prospectus, all references to watts (e.g., megawatts, gigawatts, kilowatt hour, terawatt hour, MW, GW, kWh, etc.) refer to measurements of power generated.
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This summary highlights selected information contained elsewhere in this prospectus and is qualified in its entirety by the more detailed information and consolidated financial statements and the related notes thereto included elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our equity shares. You should read this entire prospectus carefully, including Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before making an investment decision.
Overview
Our mission is to be the lowest-cost power producer in the world. We sell solar power in India on long-term fixed price contracts to our customers, at prices which in many cases are at or below prevailing alternatives for these customers. We are also developing micro-grid applications for the highly fragmented and underserved electricity market in India. Since inception, we have achieved a 73% reduction in total solar project cost, which includes a significant decrease in balance of systems costs due in part to our value engineering, design and procurement efforts.
We developed Indias first utility scale solar project in 2009. As of January 31, 2016, we operated 21 utility scale projects and several commercial rooftop projects with a combined rated capacity of 276MW which represents a compound annual growth rate, or CAGR, of 122% from May 2012. As of such date we were also constructing ten projects with a combined rated capacity of 214MW and had an additional 314MW committed, bringing our total portfolio capacity to 804MW. Megawatts committed represents the aggregate megawatt rated capacity of solar power plants pursuant to customer power purchase agreements, or PPAs, signed or allotted but not yet commissioned and operational as of the reporting date. We are targeting having 520MW operating by December 31, 2016. Our longer term goals are to achieve 1GW committed or operating by December 31, 2017 and 5GW by December 31, 2020. Our ability to achieve these goals will depend on, among other things, our ability to acquire the required land for the new capacity (on lease or direct purchase), raising adequate project financing and working capital, the growth of the Indian power market in line with current government targets, our ability to maintain our market share of Indias installed capacity as competition increases, the need to further strengthen our operations team to execute the increased capacity, and the need to further strengthen our systems and processes to manage the ensuing growth opportunities, as well as the other risks and challenges discussed under the caption Risk Factors.
Utility scale solar projects are typically awarded through government auctions. We believe we have secured more megawatts of capacity in these auctions in the last six years than any other company in India. We believe the strong demand for our solar power is a result of the following:
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Low levelized cost of energy . Our in-house engineering, procurement and construction, or EPC, expertise, purely solar focus, advanced in-house operations and maintenance, or O&M, capability and efficient financial strategy allow us to offer low-cost solar power solutions. |
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Strong value proposition for our customers . We manage the entire development and operation process, providing customers with long term fixed price PPAs in addition to high levels of availability and service. This helps us win repeat business. |
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Our integrated profile supports growth . Our integrated profile affords us greater control over project development, construction and operation, which provides us with greater insight and certainty on our construction costs and timeline. |
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Strong community partnerships . Our ability to build long term community relationships allows us to improve our time of completion, further reducing project development risk. |
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We take a leading role in policy initiatives . We provided input to the government to help it design an auction process supporting multiple winners at differentiated price points and implementing a transparent bidding process open to all participants. For example, we suggested that the government include compulsorily convertible debentures in the calculation of a bidders net worth for the purposes of tender qualification, which was ultimately adopted by the government. |
We generate revenue from a mix of leading government utilities and commercial entities. Because we have our own EPC and O&M capabilities, we retain the profit margins associated with those services that other project developers may need to pay to third-party providers.
Market Opportunity
Indias economic growth is intrinsically linked to the increasing consumption of energy and natural resources. Energy demand has outpaced capacity additions in recent years, which has resulted in persistent peak power deficits in the country. Solar is an attractive option to help address this energy gap driven by regional fundamentals and regulatory support by the Indian government. The Indian government increased its 2022 target for solar capacity from 20GW to 100GW.
The following trends have made solar a large, rapidly growing market opportunity:
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Peak power deficits and rising power prices . India continues to be plagued by a persistent demand/supply mismatch with a five-year average energy deficit of approximately 8% through March 2015 according to the Ministry of Power, which has resulted in upward pressure in power prices. |
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Strong regulatory support . In order to reduce dependence on energy imports and curtail the current trade deficit and the resulting impact on the rupee, the Indian government has taken a number of steps to incentivize the use of renewable sources of energy. These include establishing state-level renewable power purchase obligations and providing capital subsidies (known as viability gap funding) to solar project developers to make solar tariffs competitive in the country. To provide further impetus to solar growth, the Indian government launched the Jawaharlal Nehru National Solar Mission, or the NSM, in 2010. |
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Solar positioned to win among alternatives . India ranks among the highest irradiation-receiving countries in the world with more than 300 days of sunshine per year in much of the country. Solar power generation is viable across most of India, unlike wind and hydro resources which are concentrated in specific regions. In addition, as solar plants can be built near the point of consumption, power produced generally does not incur expensive transmission charges or require infrastructure or transmission investments. Further, unlike nuclear and hydropower, solar power has fewer legal liabilities and environmental constraints. |
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Solar approaching parity . State utilities have seen power costs rise as domestic coal shortages have caused thermal generators to increasingly rely on more expensive imported fuels. An analysis of current tariffs in India indicates that solar power is now competitive with wind, new thermal capacity fueled by imported coal and grid power tariffs for commercial users. Further, diesel power, the most common replacement power source for commercial and off-grid users in the country, is far more expensive than solar power. Additionally, solar panel prices are expected to fall further, which in turn is expected to drive further reductions in solar tariffs. |
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Transparent solar auction process . Indian solar auctions are conducted in a transparent manner that ensures bids meet minimum technical and financial criteria. Bidders must meet requirements on project development and execution history in India or the regional market, including bidder experience in the development of similar utility scale power projects. Auctions are not winner-take-all; instead, they are constructed to ensure multiple high-quality developers are allotted portions of the total capacity block. |
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These factors have increased the solar installation to approximately 5.2GW as of January 31, 2016, of which 4.2GW is operating under various state policies and the NSM. Approximately 7.8GW of tenders have been announced under various state policies. In addition, auctions allocating 4.3GW of projects are expected to be announced or completed under the NSM by the end of fiscal year 2017.
Our Approach
We sell energy to government utilities and independent industrial and commercial customers at predictable fixed prices. Since our energy generation does not rely on fossil fuels, our electricity prices are insulated from the volatility of commodity pricing. We also guarantee the electricity production of our solar power plants to our customers.
The typical project plan timeline for our projects is approximately one year. The major stages of project sourcing, development and operation are bidding, land acquisition, financing, material delivery and installation, and monitoring and maintenance. Once a bid is won, a letter of intent is issued and all of our departments initiate their activities. After that, the PPA is signed, which reflects the commercial operation date before which a plant should be commissioned. Generally once the letter of intent is received, we obtain the relevant land permits depending on whether the land is government-owned or private. We generally finance our projects with 75:25 debt-to-equity ratio. Once land is obtained, our EPC team works very closely to construct and deliver the plant in the most efficient manner. Once commissioned, our O&M team monitors performance of all the projects near real time.
We utilize our integrated project development, EPC, financing and O&M services without involving multiple third-party services. This approach has allowed us to generate efficiencies of scale that further drive down system costs. A low cost structure allows us to bid for auctions strategically, which supports our high auction win rate and helps preserve our market leading position, which further reduces costs.
As the first developer and operator of utility scale solar assets in India, we believe that we are a well-established brand that has grown alongside the burgeoning Indian solar market since 2009. We have proven to be a reliable developer that successfully and expediently executes on our development pipeline and wins repeat business. Our reputation and track record give us an advantage in the auction evaluation process, improving our win rate. As a result, we believe we have become one of the largest purely solar operators in the space, which affords us greater negotiating power with original equipment manufacturers and project finance lenders. This in turn improves our cost and capital structure, which benefits our bid win rate.
We lower the levelized cost of energy through our three-pronged approach as follows:
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Value engineering . Our in-house EPC allows us to enhance our system design expertise with each successive project, be flexible with our choice of technology and source from top-tier suppliers that optimizes both the system cost and power yield of the total solar block. |
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Operational performance monitoring . We operate a National Operating Control Center, or NOCC, that allows us to monitor project performance in real-time and allows us to respond rapidly to potential generation anomalies. Feedback from our operating projects also serves to further enhance our project designs, resulting in enhancements for current and new plants. |
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Financial strategy . We are able to offset project equity requirements through economic benefits generated by our EPC and O&M businesses. Coupled with our asset financing strategy we are able to optimize the overall cost of capital leading to enhanced economics for our customers and shareholders. |
Our Competitive Strengths
We believe we differentiate ourselves from the competition in a number of key ways.
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Market leadership . We have a first mover advantage from the construction of Indias first private utility scale solar photovoltaic power plant in 2009 as well as the implementation of the first megawatt scale rooftop smart city initiative in 2013. Additionally, our strong track record in policy and project development across utility scale, commercial rooftop and micro-grids projects has helped us gain a leading market share in India and a market leading auction win rate of 75% for bids we participated in from 2010 to January 31, 2016. |
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Scale and brand-name recognition . We have proven to be a reliable developer with successful and expedient execution of our development pipeline, which has helped us win repeat business. Our reputation and track record provide us an advantage in the auction evaluation process, thereby improving our win rate. As a result, we believe we have become one of the largest solar developers and operators in India. |
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In-house EPC and O&M expertise enable cost efficiencies . Our in-house EPC capabilities enhance our ability to be flexible with our choice of technology, which allows us to choose high quality equipment while optimizing the combination of total solar project cost and yield. Our in-house O&M capabilities maximize project yield and performance through proprietary system monitoring and adjustments. We have demonstrated a 73% decrease in total solar project cost since inception in part through continual innovation in our EPC and O&M capabilities. |
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Superior technical and execution capabilities . We have developed proprietary systems that significantly reduce the time it takes to design, finance, commission, operate and maintain projects. Our lean and efficient execution expertise facilitates completion of our plants ahead of contracted completion dates, enables us to easily scale our operations without significant increases to headcount, and allows us to construct several projects in parallel without compromising on efficiency. |
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Long term, stable cash generation . We typically enter into 25-year, fixed price PPAs with government agencies and independent commercial businesses. As a result of generally reliable solar irradiation in India, our energy production under these PPAs has historically had little volatility, which, coupled with our low operating expenses, makes for predictable cash flows from these agreements. |
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Long term community support . We hire from local communities and generally lease land that has few alternative uses, providing local communities with a stream of discretionary cash flow without displacing alternative businesses. As a result we are able to build long term community relationships, which allows us to improve our time of completion, further reducing project development risk. |
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Strong management . Our senior leadership team and board of directors include widely recognized experts in solar energy, energy finance and public policy, with track records of building successful businesses. |
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Our Business Strategy
Key elements of our business strategy include the following.
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Continue to drive project cost reductions. We will continue to reduce costs by leveraging our in-house EPC and O&M capabilities and by improving our negotiating power with technology providers and project lenders. We expect to further innovate our financing solutions to reduce the cost of energy for our customers and achieve grid parity with local alternatives in the utility market in the next few years. |
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Rapidly grow our project portfolio to achieve scale benefits. We intend to rapidly grow our project portfolio, which will enable us to achieve further economies of scale. We plan to significantly expand our presence in commercial and micro-grid applications. In order to continue this growth, we plan to reinvest our operating cash flow into new project development and construction. |
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Maintain position as a top Indian solar company. We are the longest tenured solar power producer in India and we believe we have the largest portfolio of operating projects under the NSM and one of the largest portfolios of operating projects in India. We have developed critical operational expertise and regional knowledge that improves project performance and expedites project execution, all of which should help us preserve our market leading position. |
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Leverage track record and management relationships to shape policy. We have petitioned governments at the local, state and central levels for substantial changes to solar policy that are essential to the advancement of the solar industry. We plan to leverage our track record, together with our managements long-running relationships with policy-makers, to influence policy at all governmental levels. |
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Expand into new locations. We participate in both national and state level renewable energy auctions. We intend to continue to expand our presence into other states in India and other emerging markets with underserved electricity markets. |
Risk Factors
Our business and the successful execution of our strategies are subject to certain risks and uncertainties related to our business and our industry, regulation of our business and our corporate structure, doing business in India and ownership of our equity shares, our trading market and this offering. The risks and uncertainties related to our business and our industry include, but are not limited to:
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we have never been profitable, and believe we will continue to incur net losses for the foreseeable future; |
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the reduction, modification or elimination of central and state government subsidies and economic incentives in India may reduce the economic benefits of our existing solar projects and our opportunities to develop or acquire suitable new solar projects; |
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our long term growth depends in part on the Indian governments ability to meet its announced targeted capacity; |
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our operations are subject to extensive governmental, health and safety and environmental regulations, which require us to obtain and comply with the terms of various approvals, licenses and permits. Any failure to obtain, renew or comply with the terms of such approvals, licenses and permits in a timely manner or at all may have a material adverse effect on our results of operations, cash flows and financial condition; |
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our limited operating history, especially with large-scale solar projects, may not serve as an adequate basis to judge our future prospects, results of operations and cash flows; |
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our operating results may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our equity shares; |
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our substantial indebtedness could adversely affect our business, financial condition, results of operations and cash flows; |
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our growth prospects and future profitability depend to a significant extent on global liquidity and the availability of additional funding options with acceptable terms; |
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if we fail to comply with financial and other covenants under our loan agreements, our financial condition, results of operations, cash flows and business prospects may be materially and adversely affected; and |
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we and our independent registered public accounting firm have identified a material weakness in our internal control over financial reporting, which could make it difficult to maintain an effective system of internal control over financial reporting, reduce the reliability of our financial reporting, harm investor confidence in our company and affect the value of our equity shares. |
See Risk Factors and Forward-Looking Statements for a more detailed discussion of these and other risks and uncertainties that we may face.
Corporate Structure
Azure Power Global Limited is a company incorporated in Mauritius and is the holding company of AZI. All of our operations at present and following the completion of this offering will be conducted through AZI and its subsidiaries. For details of the current shareholders of Azure Power Global Limited, see Principal and Selling Shareholders.
On July 25, 2015, Azure Power Global Limited purchased from the non-founder investors in AZI (i.e., International Finance Corporation, Helion Venture Partners II, LLC, Helion Venture Partners India II, LLC, FC VI India Venture (Mauritius) Ltd., DEG Deutsche Investitions Und Entwicklungsgesellschaft mbH and Société de Promotion et de Participation Pour la Coopération Économique) the equity shares and convertible securities held by them in AZI and issued an equivalent number of equity shares and convertible securities of Azure Power Global Limited to such non-founder investors on equivalent terms. Immediately prior to the consummation of this offering and the listing of the equity shares pursuant to the offering, the convertible securities of Azure Power Global Limited issued to the non-founder investors will be converted into equity shares of Azure Power Global Limited in an amount that depends, among other factors, on the initial public offering price in the offering. Assuming an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, a total of equity shares of Azure Power Global Limited will be issued to the non-founder investors upon the conversion of such convertible securities and there will be a total of equity shares of Azure Power Global Limited issued and outstanding as of such time, which includes the equity shares issuable upon exercise of outstanding stock options under our 2015 Employee Stock Option Plan. A US$1.00 increase or decrease in the assumed initial public offering price of US$ would decrease or increase the number of equity shares to be issued to the non-founder investors, and the total number of equity shares of Azure Power Global Limited issued and outstanding as of the consummation of this offering by shares and shares, respectively. See Managements Discussion and Analysis of Financial Condition and Results of OperationsCorporate Structure for a more detailed discussion
Assuming an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, IW Green
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LLC (in which Mr. Inderpreet S. Wadhwa is the sole member), Azure Power Inc. and Mr. Satnam Sanghera, collectively referred to as the APGL Founders, and the non-founder investors will own % of the equity shares in Azure Power Global Limited and % will be owned by the public investors. The percentage of Azure Power Global Limited that is owned by such shareholders will vary if the initial public offering price changes. For example, a US$1.00 decrease in the assumed initial public offering price would decrease the aggregate percentage of Azure Power Global Limited that is owned by the APGL Founders and the non-founder investors to % and would increase the percentage of Azure Power Global Limited that is owned by the public investors to %, while a US$1.00 increase in the assumed initial public offering price would increase the aggregate percentage of Azure Power Global Limited that is owned by the APGL Founders and the non-founder investors to % and would decrease the percentage of Azure Power Global Limited that is owned by the public investors to %.
Azure Power Global Limited intends to utilize substantially all of the net proceeds of this offering (other than approximately US$5 million to be retained by Azure Power Global Limited to fund its future operating expenses, including rent, professional fees and other corporate overhead expenses) to purchase million equity shares to be issued by AZI at a price of US$ per equity share, assuming that the initial public offering is priced at US$ per equity share of Azure Power Global Limited, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus. Following the completion of this offering and the purchase of additional equity shares of AZI by Azure Power Global Limited, Azure Power Global Limited will own % of the equity shares of AZI. The percentage ownership of Azure Power Global Limited will vary if the offering size or the initial public offering price changes. For example, a US$1.00 decrease in the assumed equity share price would decrease Azure Power Global Limiteds ownership of AZI by %. Alternatively, a decrease of US$10 million in the net offering proceeds would decrease Azure Power Global Limiteds ownership of AZI by %. The remaining % of the equity shares of AZI will be held by Mr. Inderpreet S. Wadhwa, Mr. Harkanwal S. Wadhwa, Azure Power Inc. and Mr. Satnam Sanghera, collectively referred to as the AZI Founders. Azure Power Global Limited has an option to purchase such equity shares from the AZI Founders. See Managements Discussion and Analysis of Financial Condition and Results of OperationsCorporate Structure for a more detailed discussion of the option. For details of the intended use of proceeds by AZI upon investment by Azure Power Global Limited into AZI, see Use of Proceeds.
The AZI employee stock option plan has been terminated and all options granted pursuant to such plan have been cancelled. Employees who were granted options under the AZI employee stock option plan have been granted options to purchase equity shares of Azure Power Global Limited pursuant to the 2015 Employee Stock Option Plan. Immediately upon the completion of this offering, the 2015 Employee Stock Option Plan will be terminated and replaced by the 2016 Equity Incentive Plan. Options issued pursuant to the 2015 Employee Stock Option Plan will be cancelled and replaced with options to be issued pursuant to the 2016 Equity Incentive Plan. Upon the closing of the offering, and without assuming any stock-split, there will be 25,930 equity shares issuable upon exercise of outstanding stock options at a weighted average exercise price of Rs. 3,418 (US$51.65) per share under our employee stock option plan.
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The diagram below illustrates our corporate structure upon the completion of this offering assuming an offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, and subsequent subscription of shares of AZI from the proceeds of this offering as described above.
(1) | The sole member of IW Green LLC is Mr. Inderpreet S. Wadhwa. |
(2) | Refers to Mr. Inderpreet S. Wadhwa and Mr. Harkanwal Singh Wadhwa. |
(3) | Azure Power Global Limited has an option to purchase the equity shares from the Founders. See Management Discussion and Analysis of Financial Condition and Results of OperationsCorporate Structure. |
Corporate Information
We are a public company limited by shares incorporated in Mauritius on January 30, 2015. Our registered office is located at c/o AAA Global Services Ltd., 1st Floor, The Exchange 18 Cybercity, Ebene, Mauritius. Our principal executive offices are located at 8 Local Shopping Complex, Pushp Vihar, Madangir, New Delhi 110062, India, and our telephone number at this location is (91-11) 49409800. Our principal website address is www.azurepower.com. The information contained on our website does not form part of this prospectus. Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, 13th Floor, New York, NY 10011.
Dividends
As we are a holding company, we will have to rely on dividends paid to us by our subsidiaries (in particular, our subsidiary in India, AZI) for our cash requirements, including funds to pay dividends and other cash
8
distributions to our shareholders, service any debt we may incur and pay our operating expenses. As of the date of this prospectus, AZI has not paid any cash dividends on its equity shares and does not intend to pay dividends to its equity shareholders, including Azure Power Global Limited, in the foreseeable future. See Dividends and Dividend Policy for more information.
Enforcement of Civil Liabilities
There is uncertainty as to whether the courts in Mauritius would enforce judgments obtained in the United States against us or our directors or executive officers, as well as the experts named herein, based on the civil liability provisions of the securities laws of the United States or allow actions in Mauritius against us or our directors or executive officers based only upon the securities laws of the United States. Further, foreign judgments may not be given effect by a Mauritius court where it would be contrary to any principle affecting public policy in Mauritius or to the extent that they constitute the payment of an amount which is in the nature of a penalty and not in the nature of liquidated damages.
In addition to and irrespective of jurisdictional issues, neither Mauritian nor Indian courts will enforce a provision of the U.S. federal securities laws that is either penal in nature or contrary to public policy. Specified remedies available under the laws of U.S. jurisdictions, including specified remedies under U.S. federal securities laws, would not be available under Mauritian or Indian law or enforceable in a Mauritian or Indian court, if they are considered to be contrary to Mauritian or Indian public policy. An award of punitive damages under a United States court judgment based upon United States federal securities laws is likely to be construed by Mauritian and Indian courts to be penal in nature and therefore unenforceable in both Mauritius and India. Further, no claim may be brought in Mauritius or India against us or our directors and officers, as well as the experts named herein, in the first instance for a violation of U.S. federal securities laws because these laws have no extraterritorial application under Mauritian or Indian law and do not have force of law in Mauritius or India.
Implications of Being an Emerging Growth Company
As a company with less than US$1.0 billion in revenue during our last fiscal year, we qualify as an emerging growth company pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement in the assessment of the emerging growth companys internal control over financial reporting. The JOBS Act also provides that an emerging growth company need not comply with any new or revised financial accounting standard until such date that a non-reporting company is required to comply with such new or revised accounting standard. We have in this prospectus utilized, and we plan in future filings with the Securities and Exchange Commission, or the SEC, to continue to utilize, the modified disclosure requirements available to emerging growth companies. Furthermore, we are not required to present selected financial information or any managements discussion herein for any period prior to the earliest audited period presented in connection with this prospectus.
We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous 3-year period, issued more than US$1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a large accelerated filer under the Securities Exchange Act of 1934, or the Exchange Act. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. If we choose to take advantage of any of these reduced reporting burdens, the information that we provide shareholders may be different than you might get from other public companies.
9
Even if we no longer qualify as an emerging growth company, as a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose disclosure requirements as well as procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as a company that files as a domestic issuer whose securities are registered under the Exchange Act, nor are we generally required to comply with the SECs Regulation FD, which restricts the selective disclosure of material non-public information. We intend to take advantage of these exemptions as a foreign private issuer.
10
Equity shares offered by us |
equity shares ( equity shares if the underwriters exercise in full their option to purchase additional equity shares). |
Equity shares offered by the selling shareholder |
equity shares. |
Option to purchase additional equity shares |
We have granted the underwriters an option, which is exercisable within 30 days from the date of this prospectus, to purchase up to additional equity shares from us at the public offering price less the underwriting discount. |
Equity shares to be outstanding before this offering |
equity shares. |
Equity shares to be outstanding immediately after this offering |
equity shares ( equity shares if the underwriters exercise in full their option to purchase additional equity shares). |
Use of Proceeds |
We anticipate that we will receive net proceeds from this offering of approximately US$ million, or approximately US$ million if the underwriters exercise their option to purchase additional equity shares in full. These estimates are based upon an assumed initial public offering price of US$ per equity share, the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts, commissions and estimated aggregate offering expenses payable by us. |
We intend to use US$ million to fund the purchase by Azure Power Global Limited of equity shares to be issued by AZI, which will occur contemporaneously with the completion of this offering. Net proceeds to be received by AZI as a result of such purchase are intended to be used for project development, working capital needs and other general corporate purposes. We intend to retain US$5.0 million to fund future operating expenses of Azure Power Global Limited. To the extent the underwriters exercise their option to purchase additional equity shares, the net proceeds from the sale of the additional equity shares will be used to purchase additional equity shares of AZI. See Use of Proceeds. |
We will not receive any of the proceeds from the sale of equity shares by the selling shareholder. |
Directed Share Program |
At our request, the underwriters have reserved % of the equity shares offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees, business associates and related persons. If these persons purchase equity shares, this will reduce the number of shares available for sale to the public. |
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Risk Factors |
See Risk Factors and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the equity shares. |
Dividend Policy |
We currently intend to retain our earnings, if any, to finance the development and growth of our business and operations as well as expand our business and do not currently anticipate paying dividends on our equity shares in the near future. See Dividends and Dividend Policy. |
Listing |
We have applied to list our equity shares on the New York Stock Exchange. |
Proposed Trading Symbol |
AZRE. |
Certain Assumptions
The number of our equity shares to be outstanding after this offering, the combined voting power that identified shareholders will hold after this offering and the economic interest in our business that identified shareholders will hold after this offering are based on the following assumptions:
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the conversion of compulsorily convertible preferred shares and compulsorily convertible debentures into equity shares; |
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the effectiveness of a -for- stock split; and |
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our and the selling shareholders sale of equity shares in this offering. |
The number of our equity shares to be outstanding after this offering, the combined voting power that identified shareholders will hold after this offering and the economic interest in our business that identified shareholders will hold after this offering excludes the following:
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equity shares which may be issued upon the exercise of the underwriters option to purchase additional shares of our equity shares; and |
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equity shares issuable upon exercise of outstanding stock options at a weighted-average exercise price of Rs. (US$ ) per share under our 2015 Employee Stock Option Plan. |
Except as otherwise indicated, all information in this prospectus assumes that the underwriters do not exercise their option to purchase additional equity shares.
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SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA
Azure Power Global Limited is a company incorporated in Mauritius and is the holding company of AZI. All of its operations are conducted currently through AZI and its subsidiaries. The proceeds of this offering will be used towards a share subscription of AZI by Azure Power Global Limited and will occur contemporaneously with the completion of the offering.
The financial information in this section has been derived from the audited consolidated financial statements as of and for the years ended March 31, 2014 and 2015 included elsewhere in this prospectus.
The unaudited information for the nine months ended December 31, 2014 and 2015 was prepared on a basis consistent with that used to prepare our audited consolidated financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of our financial condition and results of operations with respect to the relevant periods.
The summary unaudited pro forma balance sheet data as of December 31, 2015 gives effect to (i) the conversion of compulsorily convertible preferred shares and compulsorily convertible debentures into equity shares and (ii) the effectiveness of a -for- stock split of our equity shares. The pro forma as adjusted balance sheet data reflects the abovementioned transactions, the issuance and sale of equity shares in this offering and the use of proceeds therefrom as set forth in Use of Proceeds, based on an assumed offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
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The following table should be read together with, and is qualified in its entirety by reference to, the consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus. Among other things, the consolidated financial statements include more detailed information regarding the basis of presentation for the information in the following table. The historical results are not necessarily indicative of the results that may be expected in any future period, and the interim results are not necessarily indicative of the results to be expected for the full fiscal year. The table should also be read together with Managements Discussion and Analysis of Financial Condition and Results of Operations.
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(1) | Rs. | Rs. | US$(1) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Statement of Operations Data: |
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Operating revenue: |
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Sale of power |
881,345 | 1,124,138 | 16,984 | 767,362 | 1,858,911 | 28,084 | ||||||||||||||||||
Operating costs and expenses: |
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Cost of operations (exclusive of depreciation and amortization shown separately below) |
52,491 | 79,816 | 1,206 | 54,029 | 127,308 | 1,923 | ||||||||||||||||||
General and administrative expenses |
235,300 | 425,952 | 6,435 | 241,884 | 481,528 | 7,275 | ||||||||||||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | 218,016 | 495,647 | 7,488 | ||||||||||||||||||
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Total operating cost and expenses |
540,143 | 828,198 | 12,512 | 513,929 | 1,104,483 | 16,686 | ||||||||||||||||||
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Operating income |
341,202 | 295,940 | 4,472 | 253,433 | 754,428 | 11,398 | ||||||||||||||||||
Other expense: |
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Interest expense, net(2) |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
Loss on foreign currency exchange(3) |
580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | ||||||||||||||||||
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Total other expenses |
1,100,785 | 1,131,418 | 17,094 | 932,559 | 1,726,401 | 26,082 | ||||||||||||||||||
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Loss before income taxes |
(759,583 | ) | (835,478 | ) | (12,622 | ) | (679,126 | ) | (971,973 | ) | (14,684 | ) | ||||||||||||
Income tax expense |
(15,847 | ) | (253,112 | ) | (3,824 | ) | (205,804 | ) | (89,427 | ) | (1,351 | ) | ||||||||||||
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Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | (884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||||||||
Net loss attributable to non-controlling interest(4) |
(26,935 | ) | (5,595 | ) | (85 | ) | (5,311 | ) | (8,633 | ) | (130 | ) | ||||||||||||
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Net loss attributable to APGL |
(748,495 | ) | (1,082,995 | ) | (16,361 | ) | (879,619 | ) | (1,052,767 | ) | (15,905 | ) | ||||||||||||
Accretion on Mezzanine CCPS(5) |
(366,552 | ) | (755,207 | ) | (11,410 | ) | (494,927 | ) | (1,076,087 | ) | (16,258 | ) | ||||||||||||
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Accretion to redeemable non-controlling interest(6) |
| | | | (18,837 | ) | (285 | ) | ||||||||||||||||
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Net loss attributable to APGL equity shareholders |
(1,115,047 | ) | (1,838,202 | ) | (27,771 | ) | (1,374,546 | ) | (2,147,691 | ) | (32,448 | ) | ||||||||||||
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Net loss per share attributable to equity shareholders |
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Basic and diluted(7) |
(10,241 | ) | (16,737 | ) | (253 | ) | (12,510 | ) | (19,546 | ) | (295 | ) | ||||||||||||
Shares used in computing basic and diluted per share amounts: |
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Proforma basic and diluted loss per share(8) |
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Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(1) | Rs. | Rs. | US$(1) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Proforma shares used in computing basic and diluted loss per share(8) |
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Equity shares |
108,882 | 109,830 | | 109,880 | 109,880 | | ||||||||||||||||||
Supplemental information (unaudited): |
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Adjusted EBITDA(9) |
593,554 | 618,370 | 9,343 | 471,449 | 1,250,075 | 18,886 | ||||||||||||||||||
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(1) | Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Further, AZIs functional and reporting currency is the Indian rupee. Solely for the convenience of the reader, we have translated the financial information as of and for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 into U.S. dollars. The rate used for this translation is Rs. 66.19 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2015, which is the date of our last reported financial statements. |
(2) | Interest expense, net consists of: |
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(a) | Rs. | Rs. | US$(a) | |||||||||||||||||||
Interest expense: |
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Compulsorily convertible debentures |
217,751 | 248,831 | 3,759 | 202,051 | 238,113 | 3,597 | ||||||||||||||||||
Series E compulsorily convertible preferred shares |
74,700 | 96,500 | 1,458 | 71,242 | 157,355 | 2,377 | ||||||||||||||||||
Term loans |
316,519 | 598,845 | 9,048 | 374,806 | 1,108,360 | 16,745 | ||||||||||||||||||
Bank charges and other |
36,151 | 55,454 | 838 | 33,661 | 78,682 | 1,189 | ||||||||||||||||||
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645,121 | 999,630 | 15,103 | 681,760 | 1,582,510 | 23,908 | |||||||||||||||||||
Interest income: |
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Term deposits |
111,842 | 151,860 | 2,294 | 107,778 | 159,137 | 2,404 | ||||||||||||||||||
Interest income from related parties |
| 2,031 | 31 | | | | ||||||||||||||||||
Gain on sale of short term investments |
13,060 | 13,949 | 211 | 10,054 | 34,084 | 515 | ||||||||||||||||||
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Interest expense, net |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
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(a) | Refer to note (1) above. |
(3) | Loss on foreign currency exchange consists of: |
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(a) | Rs. | Rs. | US$(a) | |||||||||||||||||||
Unrealized loss on foreign currency loans |
578,571 | 240,656 | 3,636 | 319,778 | 345,474 | 5,219 | ||||||||||||||||||
Realized loss on foreign currency loans |
39,989 | (42,280 | ) | (639 | ) | (6,304 | ) | (46,429 | ) | (701 | ) | |||||||||||||
Unrealized loss on derivative instruments |
(16,384 | ) | 7,342 | 111 | (13,527 | ) | (2,364 | ) | (36 | ) | ||||||||||||||
Realized loss on derivative instruments |
(21,610 | ) | 93,910 | 1,419 | 68,684 | 40,431 | 611 | |||||||||||||||||
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580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | |||||||||||||||||||
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(a) | Refer to note (1) above. |
The unrealized and realized foreign exchange loss represents the foreign currency fluctuations on our non-Indian rupee denominated borrowings.
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(4) | Represents a non-controlling interest of 20% in a subsidiary. |
(5) | Our Series A, Series B, Series C, Series D, Series F and Series H compulsorily convertible preferred shares, or collectively the Mezzanine CCPS, are being accreted to their redemption value through February 25, 2016, the earliest redemption date, to earn the mandatory redemption amount on such date. |
(6) | Represents accretion to the redeemable non-controlling interest in a subsidiary which is accreted to its accretion value. |
(7) | Basic and diluted net loss per share attributable to Azure Power Global Limited equity shareholders is computed by dividing the net loss attributable to Azure Power Global Limited equity shareholders by the weighted average number of equity shares outstanding for the period. The potentially dilutive compulsorily convertible preferred shares, compulsorily convertible debentures and share options were excluded from the calculation of dilutive loss per share in those periods where inclusion would be anti-dilutive. |
(8) | Pro forma net loss per share attributable to Azure Power Global Limited equity shareholders for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 is calculated as if the compulsorily convertible preferred shares and the compulsorily convertible debentures had been converted into equity shares at the beginning of the respective period presented or when compulsorily convertible preferred shares and compulsorily convertible debentures were issued, if later. Compulsorily convertible preferred shares and compulsorily convertible debentures upon the completion of this offering convert into (i) equity shares as of March 31, 2015 and (ii) equity shares as of December 31, 2015 based upon the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus. |
(9) | Adjusted EBITDA is a non-GAAP financial measure. We present Adjusted EBITDA as a supplemental measure of our performance. This measurement is not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. |
We define Adjusted EBITDA as net loss (income) plus (a) income tax expense, (b) interest expense, net, (c) depreciation and amortization, and (d) loss (income) on foreign currency exchange. We believe Adjusted EBITDA is useful to investors in evaluating our operating performance because:
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securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities; and |
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it is used by our management for internal reporting and planning purposes, including aspects of our consolidated operating budget and capital expenditures. |
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
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it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments or foreign exchange gain/loss; |
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it does not reflect changes in, or cash requirements for, working capital; |
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it does not reflect significant interest expense or the cash requirements necessary to service interest or principal payments on our outstanding debt; |
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it does not reflect payments made or future requirements for income taxes; and |
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although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or paid in the future and Adjusted EBITDA does not reflect cash requirements for such replacements or payments. |
Investors are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis.
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The following table presents a reconciliation of net loss to Adjusted EBITDA:
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(a) | Rs. | Rs. | US$(a) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | (884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||||||||
Income tax expense |
15,847 | 253,112 | 3,824 | 205,804 | 89,427 | 1,351 | ||||||||||||||||||
Interest expense, net |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | 218,016 | 495,647 | 7,488 | ||||||||||||||||||
Loss on foreign currency exchange |
580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | ||||||||||||||||||
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Adjusted EBITDA |
593,554 | 618,370 | 9,343 | 471,449 | 1,250,075 | 18,886 | ||||||||||||||||||
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(a) | Refer to note (1) above. |
As of December 31, | As of December 31, | |||||||||||||||
2015 |
2015
(Pro forma)(5) |
2015
(Pro forma as adjusted)(5) |
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Rs. | US$(1) | Rs. | US$(1) | Rs. | US$(1) | |||||||||||
Balance Sheet Data |
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Cash and cash equivalents |
3,744,450 | 56,571 | ||||||||||||||
Property, plant and equipment, net |
21,058,666 | 318,155 | ||||||||||||||
Total assets |
29,270,158 | 442,214 | ||||||||||||||
Compulsorily convertible debentures and Series E & Series G preferred shares(2) |
3,340,619 | 50,470 | ||||||||||||||
Project level and other debt(3) |
17,038,860 | 257,423 | ||||||||||||||
Mezzanine CCPS shares(4) |
9,461,436 | 142,944 | ||||||||||||||
Total APGL shareholders deficit |
(6,560,282 | ) | (99,112 | ) |
(1) | Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Further, AZIs functional and reporting currency is the Indian rupee. Solely for the convenience of the reader, we have translated the financial information as of and for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 into U.S. dollars. The rate used for this translation is Rs. 66.19 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2015, which is the date of our last reported financial statements. |
(2) | The Series E and Series G compulsorily convertible preferred shares are classified as a current liability in the consolidated balance sheet because the preference shareholders have a right to convert their shares into variable number of equity shares to give them their required returns. |
(3) | This balance represents the short term and long term portion of project level secured term loans and other secured bank loans. |
(4) | Compulsorily convertible preferred shares include the Mezzanine CCPS and are classified as temporary equity in the consolidated balance sheet. |
(5) | The pro forma and pro forma as adjusted columns in the balance sheet data reflects the transactions described in the last paragraph of page 13. |
The pro forma as adjusted information set forth in the table above is for illustrative purposes only and will be adjusted based on the actual initial public offering price and other terms of this offering as determined at pricing.
A US$1.00 increase or decrease in the assumed public offering price of US$ would increase or decrease each of pro forma as adjusted cash and cash equivalents, total assets, and total deficit by Rs. thousands (US$ ), assuming the number of shares offered by us, as set forth on the cover page of the prospectus, remains the same, after deducting estimated underwriting discounts, commissions and estimated offering expenses payable by us.
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You should carefully consider the risks described below and all other information contained in this prospectus before making an investment decision. If any of the following risks actually occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected. In that event, the trading price of our equity shares could decline, and you may lose part or all of your investment. This prospectus also contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risks described below and elsewhere in this prospectus.
Risks Related to Our Business and Our Industry
We have never been profitable, and believe we will continue to incur net losses for the foreseeable future.
We have incurred losses since our inception, including a net loss of US$16.0 million for the nine months ended December 31, 2015 and US$16.4 million for fiscal year 2015. We believe that we will continue to incur net losses as we expect to make continued significant investment in our solar projects. As of January 31, 2016, we operated 21 utility scale projects and several commercial rooftop projects with a combined rated capacity of 276MW. As of January 31, 2016, we were also constructing ten projects with a combined rated capacity of 214MW and had an additional 314MW of projects committed, bringing our total portfolio capacity to 804MW. A significant number of power projects are presently committed and under construction, and we can only monetize them, if at all, after each project is completed, which is subject to several factors, including receiving regulatory approvals, obtaining project funding, entering into transmission arrangements with the central or state transmission utilities, and acquiring land for projects. In addition, even after a project is operational, the monetization process may be quite long term with contracts running up to 25 years. Moreover, we may not succeed in addressing certain risks, including our ability to successfully develop or supervise the commissioning, operations and maintenance of our projects or maintain adequate control of our costs and expenses. Also, we may find that our growth plans are more costly than we anticipate and that they do not ultimately result in commensurate increases in revenue, which would further increase our losses. Additionally, we have not, and likely will not in the foreseeable future, generate sufficient cash flow required for our growth plans. We expect we will continue to experience losses, some of which could be significant. Results of operations will depend upon numerous factors, some of which are beyond our control, including the availability of preferential feed-in tariffs for solar power and other subsidies, global liquidity and competition.
The reduction, modification or elimination of central and state government subsidies and economic incentives in India may reduce the economic benefits of our existing solar projects and our opportunities to develop or acquire suitable new solar projects.
The development and profitability of renewable energy projects in the locations in which we operate are dependent on policy and regulatory frameworks that support such developments. The cost of generating electricity from solar energy in India currently exceeds, and very likely will continue to exceed for the foreseeable future, the cost of generating electricity from conventional energy sources such as domestic coal. These subsidies and incentives have been primarily in the form of preferential tariffs, project cost subsidies, tax incentives, tax holidays, and other incentives to end users, distributors, system integrators and manufacturers of solar energy products. For instance, the National Tariff Policy 2006 requires State Electricity Regulatory Commissions, or SERCs, to set Renewable Purchase Obligations, or RPOs, on their distribution companies of solar energy, and provides that procurement of electricity by such distribution companies must be done at preferential tariffs, which is determined by the relevant SERC from time to time. Further, the Indian Ministry of New and Renewable Energy, or the MNRE, has introduced the generation based incentive scheme to support small grid solar projects, pursuant to which the MNRE will pay incentives to the state utilities when they directly purchase solar power from project developers. Further, Indias Income Tax Act, 1961 as amended, provides for
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certain tax benefits, including 100% tax deductions of the profits derived from generation of power for 10 consecutive years. In addition, certain state policies also provide subsidies and economic incentives. For instance, the state policy in Punjab provides certain tax exemptions, including in relation to supply of capital goods used for setting up projects.
The availability and size of such subsidies and incentives depend, to a large extent, on political and policy developments relating to environmental concerns in India and are typically available only for a specified time duration. Generally, the amount of government subsidy for solar projects has been decreasing as the cost of producing energy has approached grid parity. Changes in central and state policies could lead to a significant reduction in or a discontinuation of the support for renewable energies. Reductions in government subsidies and economic incentives that apply to future solar projects could diminish the availability of our opportunities to continue to develop or acquire suitable newly developed solar projects. Such reductions may also apply retroactively to existing solar projects, which could significantly reduce the economic benefits we receive from our existing solar projects. Moreover, some of the solar program subsidies and incentives expire or decline over time, are limited in total funding, require renewal from regulatory authorities or require us to meet certain investment or performance criteria. In addition, although various SERCs have specified RPOs for their distribution companies, the implementation of RPO schemes has not been uniform across Indian states. Although states are beginning to enforce RPOs under the guidance from the central government, RPOs have historically been breached without consequences.
Additionally, we may not continue to qualify for such subsidies and incentives. We could also choose to implement other solar power projects, such as rooftop projects, that are outside the scope of such subsidies and incentives.
Further, increased emphasis on reducing greenhouse gas emissions and the possibility of trading carbon dioxide emission quotas has led to extra duties being levied on sources of energy, primarily fossil fuels, which cause carbon dioxide pollution. The imposition of these duties has indirectly supported the expansion of power generated from renewable energy and, in turn, solar projects in general. If such direct and indirect government support for renewable energy were terminated or reduced, it would make producing electricity from solar projects less competitive and reduce demand for new solar projects.
A significant reduction in the scope or discontinuation of government incentive programs in our markets could have a material adverse effect on our business, financial condition, results of operations, cash flows and prospects.
Our long term growth depends in part on the Indian governments ability to meet its announced targeted capacity.
The Indian government increased its 2022 target for solar capacity from 20GW to 100GW. However, new capacity additions have historically been lower than the governments announced targeted capacity. For example, actual capacity additions represented only 70% of the targeted capacity of 78.7GW in the Eleventh Five-Year Plan. This shortfall in capacity additions was due to issues in timely commissioning of conventional power plants, which included delays in land acquisition, obtaining regulatory permits and difficulties in securing reliable and cost efficient fuel supplies. Under the prior Five Year Plans before the Eleventh Five-Year Plan, solar capacity targets were not included. As such, there is a short track record of meeting solar capacity targets. As for reaching target capacity for other renewable energy sources, in certain Five Year Plans those targets were met while others have fallen short. Any failure to meet the governments targeted solar capacity may result in a slowdown in our growth opportunities and adversely affect our ability to achieve our long term business objectives, targets and goals.
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Our operations are subject to extensive governmental, health and safety and environmental regulations, which require us to obtain and comply with the terms of various approvals, licenses and permits. Any failure to obtain, renew or comply with the terms of such approvals, licenses and permits in a timely manner or at all may have a material adverse effect on our results of operations, cash flows and financial condition.
The power generation business in India is subject to a broad range of environmental, safety and other laws and regulations. These laws and regulations require us to obtain and maintain a number of approvals, licenses, registrations and permits for developing and operating power projects. Additionally, we may need to apply for more approvals in the future, including renewal of approvals that may expire from time to time. For example, we require various approvals during construction of our solar projects and prior to the commissioning certificate is issued, including capacity allocation and capacity transfer approvals, approvals from the local pollution control boards, evacuation and grid connectivity approvals and approval from the chief electrical inspector for installation and energization of electrical installations at the solar project sites. In addition, we are required to comply with state-specific requirements. Certain approvals may not be obtained in a timely manner. Certain approvals may also be granted on a provisional basis or for a limited duration and require renewal. If the conditions specified therein are not satisfied at a later date, we may not be able to evacuate power from these projects.
In addition, we could be affected by the adoption or implementation of new safety, health and environmental laws and regulations, new interpretations of existing laws, increased governmental enforcement of environmental laws or other similar developments in the future. For instance, we currently fall under an exemption granted to solar photovoltaic projects that exempts us from complying with the Environment Impact Assessment Notification, 2006, issued under the Environment (Protection) Act, 1986. While we are required to obtain consents to establish and operate in certain Indian states under the Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981 and the Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008, certain state policies in relation to solar projects exempt us from obtaining such consents or have reduced or simplified procedural requirements for obtaining such consents. However, there can be no assurance that we will not be subject to any such consent requirements in the future, and that we will be able to obtain and maintain such consents or clearances in a timely manner, or at all, or that we will not become subject to any regulatory action on account of not having obtained or renewed such clearances in any past periods. Furthermore, our government approvals and licenses are subject to numerous conditions, some of which are onerous and require us to make substantial expenditure. We may incur substantial costs, including clean up or remediation costs, fines and civil or criminal sanctions, and third-party property damage or personal injury claims, as a result of any violations of or liabilities under environmental or health and safety laws or noncompliance with permits and approvals, which, as a result, may have an adverse effect on our business and financial condition. For instance, we are currently involved, along with the Government of Rajasthan, in a public interest litigation in relation to our 5MW project in Rajasthan. Members of the local community have alleged that the operation of this project has resulted in a water shortage for the local community and that the plant has been established on pasture land. The matter is currently pending adjudication before the High Court of Rajasthan.
We cannot assure you that we will be able to apply for or renew any approvals, licenses, registrations or permits in a timely manner, or at all, and that the relevant authorities will issue any of such approvals, licenses, registrations or permits in the time frames anticipated by us. Further, we cannot assure you that the approvals, licenses, registrations and permits issued to us would not be subject to suspension or revocation for non-compliance or alleged non-compliance with any terms or conditions thereof, or pursuant to any regulatory action. Any failure to apply for, renew and obtain the required approvals, licenses, registrations or permits, or any suspension or revocation of any of the approvals, licenses, registrations and permits that have been or may be issued to us, or any onerous conditions made applicable to us in terms of such approvals, licenses, registrations or permits may impede the successful commissioning and operations of our power projects, which may adversely affect our business, results of operations and cash flows.
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Our limited operating history, especially with large-scale solar projects, may not serve as an adequate basis to judge our future prospects, results of operations and cash flows.
We began our business in 2008 and have a limited operating history. We established our first utility scale solar plant in India in 2009. As of January 31, 2016, we operated 21 utility scale projects and several commercial rooftop projects with a combined rated capacity of 276MW. As of such date, we were also constructing ten projects with a combined rated capacity of 214MW and had an additional 314MW of projects committed, bringing our total portfolio capacity to 804MW. Accordingly, our relatively limited operating history may not be an adequate basis for evaluating our business prospects and financial performance, and makes it difficult to predict the future results of our operations. Period-to-period comparisons of our operating results and our results of operations for any period should not be relied upon as an indication of our performance for any future period. In particular, our results of operations, financial condition, cash flows and future success depend, to a significant extent, on our ability to continue to identify suitable sites, acquire land for solar projects, obtain required regulatory approvals, arrange financing from various sources, construct solar projects in a cost-effective and timely manner, expand our project pipeline and manage and operate solar projects that we develop. If we cannot do so, we may not be able to expand our business at a profit or at all, maintain our competitive position, satisfy our contractual obligations, or sustain growth and profitability.
Our operating results may fluctuate from quarter to quarter, which could make our future performance difficult to predict and could cause our operating results for a particular period to fall below expectations, resulting in a severe decline in the price of our equity shares.
Our quarterly operating results are difficult to predict and may fluctuate significantly in the future. We have experienced seasonal and quarterly fluctuations in the past, especially in the winter months. However, given that we are an early-stage company operating in a rapidly growing industry, those fluctuations may be masked by our recent growth rates and thus may not be readily apparent from our historical operating results. As such, our past quarterly operating results may not be good indicators of future performance.
In addition to the other risks described in this Risk Factors section, the following factors could cause our operating results to fluctuate:
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the expiration or initiation of any central or state subsidies or incentives; |
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our ability to complete installations in a timely manner due to market conditions or due to inconsistently available financing; |
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our ability to continue to expand our operations, and the amount and timing of expenditures related to such expansions; |
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announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; |
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changes in auction rules; |
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changes in feed-in tariff rates for solar power, viability gap funding, or VGF, our pricing policies or terms or those of our competitors; |
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actual or anticipated developments in our competitors businesses or the competitive landscape; and |
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an occurrence of low global horizontal irradiation that affects our generation of solar power. |
For these or other reasons, the results of any prior quarterly or annual periods should not be relied upon as indications of our future performance. In addition, our actual revenue, key operating and financial metrics and other operating results in future quarters may fall short of the expectations of investors and financial analysts, which could have a severe adverse effect on the trading price of our equity shares.
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Our substantial indebtedness could adversely affect our business, financial condition, results of operations and cash flows.
As of December 31, 2015, we had US$35.22 million in current liabilities, excluding the current portion of long-term debt and short-term debt, and US$334.3 million in outstanding long-term borrowings, including the current portion of long-term debt and short-term debt. Long term borrowings as of December 31, 2015, after giving effect to the conversion of our convertible securities in connection with this offering, will be US$ million. Generally these borrowings relate to the financing for our projects and are secured by the project assets.
Our debt could have significant consequences on our operations, including:
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reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes as a result of our debt service obligations; |
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limiting our ability to obtain additional financing; |
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limiting our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate and the general economy; |
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potentially increasing the cost of any additional financing; and |
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limiting the ability of our project operating subsidiaries to pay dividends to us for working capital or return on our investment. |
In addition, our borrowings under certain project-specific financing arrangement have floating rates of interest. Therefore, an increase or decrease in interest rates will increase or decrease our interest expense associated with such borrowing. A significant increase in interest expense could have an adverse effect on our business, financial condition, results of operations and cash flows impacting our ability to meet our payment obligations under our debt.
Any of these factors and other consequences that may result from our substantial indebtedness could have an adverse effect on our business, financial condition, results of operations and cash flows impacting our ability to meet our payment obligations under our debt. Our ability to meet our payment obligations under our outstanding debt depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control.
Our growth prospects and future profitability depend to a significant extent on global liquidity and the availability of additional funding options with acceptable terms.
We require a significant amount of cash to fund the installation and construction of our projects and other aspects of our operations, and expect to incur additional borrowings in the future, as our business and operations grow. We may also require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue in order to remain competitive.
Historically, we have used loans, equity contributions, and government subsidies to fund our project development. We expect to expand our business with proceeds from this initial public offering and third-party financing options, including any bank loans, equity partners, financial leases and securitization. However, we cannot guarantee that we will be successful in locating additional suitable sources of financing in the time periods required or at all, or on terms or at costs that we find attractive or acceptable, which may render it impossible for us to fully execute our growth plan. In addition, rising interest rates could adversely impact our ability to secure financing on favorable terms.
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Installing and constructing solar projects requires significant upfront capital expenditure and there may be a significant delay before we can recoup our investments through the long-term recurring revenue of our solar projects. Our ability to obtain external financing is subject to a number of uncertainties, including:
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our future financial condition, results of operations and cash flows; |
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the general condition of global equity and debt capital markets; |
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our credit ratings and past credit history; |
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decline of the Indian rupee compared to U.S. dollar; |
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regulatory and government support in the form of tax incentives, preferential tariffs, project cost subsidies and other incentives; |
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the continued confidence of banks and other financial institutions in our company and the solar power industry; |
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economic, political and other conditions in the jurisdictions where we operate; and |
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our ability to comply with any financial covenants under the debt financing. |
Any additional equity financing may be dilutive to our shareholders and any debt financing may contain restrictive covenants that limit our flexibility going forward. Furthermore, our credit ratings may be downgraded, which would adversely affect our ability to refinance debt and increase our cost of borrowing. Failure to manage discretionary spending and raise additional capital or debt financing as required may adversely impact our ability to achieve our intended business objectives.
If we fail to comply with financial and other covenants under our loan agreements, our financial condition, results of operations, cash flows and business prospects may be materially and adversely affected.
We expect to continue to finance a significant portion of our project development and construction costs with project financing. The agreements with respect to our existing project-level indebtedness contain financial and other covenants that require us to maintain certain financial ratios or impose certain restrictions on disposition of our assets or the conduct of our business. We have not been in compliance with all financial and other covenants and we may not be able to comply with some of those financial and other covenants from time to time. For example, as of September 30, 2014 we were not in compliance with three financial covenants, the cash flow to debt service ratio, the current asset to current liability ratio and the indebtedness to tangible net worth ratio, for our Punjab 1 project and one financial covenant, the indebtedness to tangible net worth ratio, for our Gujarat 1 project. We have obtained waivers from the lender to cure the non-compliances. In addition, we typically pledge our solar project assets or account or trade receivables, and in certain cases, shares of the special purpose vehicles, to raise debt financing, and we are restricted from creating additional security over our assets. Such account or trade receivables will include all income generated from the sale of electricity in the solar projects.
Our financing agreements also include certain restrictive covenants whereby we may be required to obtain approval from our lenders to, among other things, incur additional debt, undertake guarantee obligations, enter into any scheme of merger, amalgamation, compromise, demerger or reconstruction, change our capital structure and controlling interest, dispose of or sell assets, transfer shares held by major shareholders to third parties, invest by way of share capital, lend and advance funds, declare dividends in the event of any default in repayment of debts or failure to maintain financial ratios, place deposits and change our management structure. Most of our lenders also impose significant restrictions in relation to our solar projects, under the terms of the relevant project loans taken by our respective subsidiaries. For example, we are required to obtain lenders consent to make any changes to, or terminate, project documents, waive any material claims or defaults under the project documents, make any changes to financing plans relating to our projects, and replace suppliers or other material project participants. There can be no assurance that such consent will be granted in a timely manner, or
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at all. In the event that such lender consents are granted, they may impose certain additional conditions on us, which may limit our operational flexibility or subject us to increased scrutiny by the relevant lenders. The time required to secure consents may hinder us from taking advantage of a dynamic market environment. These agreements also grant certain lenders the right to appoint nominee directors on the board of directors of AZI or its subsidiaries and require us to maintain certain ratings or other levels of credit worthiness. If we breach any financial or other covenants contained in any of our financing arrangements, we may be required to immediately repay our borrowings either in whole or in part, together with any related costs.
Our failure to comply with financial or restrictive covenants or periodic reporting requirements or to obtain our lenders consent to take restricted actions in a timely manner or at all may result in the declaration of an event of default by one or more of our lenders, which may accelerate repayment of the relevant loans or trigger cross defaults under other financing agreements. We cannot assure you that, in the event of any such acceleration, we will have sufficient resources to repay these borrowings. Failure to meet our obligations under the debt financing agreements could have an adverse effect on our cash flows, business and results of operations. Furthermore, a breach of those financial and other covenants or a failure to meet certain financial ratios under these financing agreements will also restrict our ability to pay dividends.
Any default or failure by us to repay our loans in a timely manner or at all could impact the ability of two of our directors who have personally guaranteed a portion of our loans to further guarantee our indebtedness and cause an adverse effect on our business and results of operation.
Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have personally guaranteed the repayment of a number of AZIs loans. In connection with the working capital facility provided by the Central Bank of India, Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have each guaranteed Rs. 543.3 million and Rs. 69.7 million, respectively, in favor of the lender.
In addition, Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have provided personal guarantees in favor of the Central Bank of India for the repayment of loans of three of our project subsidiaries in the amounts of Rs. 315 million, Rs. 639 million and Rs. 1,306 million in addition to the payment of any interest and other monies payable to the lender. Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have each also personally guaranteed a loan from Reliance Capital Limited in the amount of Rs. 1 billion and a loan from IFCI Limited in the amount of Rs. 1 billion.
Any default or failure by us to repay these loans in a timely manner, or at all, could trigger repayment obligations on the part of Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa, which could impact their ability to guarantee our indebtedness and could cause them to forfeit the stock pledged in relation to such loans, thereby having an adverse effect on our business, results of operation and cash flows.
The delay between making significant upfront investments in our solar projects and receiving revenue could materially and adversely affect our liquidity, business, results of operations and cash flows.
There are generally many months or even years between our initial bid in renewable energy auctions to build solar projects and the date on which we begin to recognize revenue from the sale of electricity generated by such solar projects. Our initial investments include, without limitation, legal, accounting and other third-party fees, costs associated with project analysis and feasibility study, payments for land rights, payments for interconnection and grid connectivity arrangements, government permits, engineering and procurement of solar panels, balance of system costs or other payments, which may be non-refundable. As such, projects may not be fully monetized for 25 years given the average length of our PPAs, but we bear the costs of our initial investment upfront. Furthermore, we have historically relied on our own equity contribution and bank loans to pay for costs and expenses incurred during project development. Solar projects typically generate revenue only after becoming commercially operational and starting to sell electricity to the power grid through offtakers. There may be long delays from the initial bid to projects becoming shovel-ready, due to the timing of auctions, permitting and grid
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connectivity process. Between our initial investment in the development of permits for solar projects and their connection to the transmission grid, there may be adverse developments, such as unfavorable environmental or geological conditions, labor strikes, panel shortages or monsoon weather. Furthermore, we may not be able to obtain all of the permits as anticipated, permits that were obtained may expire or become ineffective and we may not be able to obtain project level debt financing as anticipated. In addition, the timing gap between our upfront investments and actual generation of revenue, or any added delay in between due to unforeseen events, could put strains on our liquidity and resources, and materially and adversely affect our profitability, results of operations and cash flows.
Solar project development is challenging and our growth strategy may ultimately not be successful, which can have a material adverse effect on our business, financial condition, results of operations and cash flows.
The development and construction of solar projects involve numerous risks and uncertainties and require extensive research, planning and due diligence. We may be required to incur significant capital expenditures for land and interconnection rights, regulatory approvals, preliminary engineering, permits, and legal and other expenses before we can determine whether a solar project is economically, technologically or otherwise feasible.
We intend to expand our business significantly with a number of new projects in both new and existing jurisdictions in the future. As we grow, we expect to encounter additional challenges to our internal processes, external construction management, capital commitment process, project funding infrastructure and financing capabilities. Our existing operations, personnel, systems and internal control may not be adequate to support our growth and expansion and may require us to make additional unanticipated investments in our infrastructure. To manage the future growth of our operations, we will be required to improve our administrative, operational and financial systems, procedures and controls, and maintain, expand, train and manage our growing employee base. We will need to hire and train project development personnel to expand and manage our project development efforts. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies successfully or respond to competitive pressures. As a result, our business, prospects, financial condition, results of operations and cash flows could be materially and adversely affected.
Success in executing our growth strategy is contingent upon, among others:
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accurately prioritizing geographic markets for entry, including estimates on addressable market demand; |
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managing local operational, capital investment or components sourcing in compliance with regulatory requirements; |
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negotiating favorable payment terms with suppliers; |
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collecting economic incentives as expected; and |
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signing PPAs or other arrangements that are commercially acceptable, including adequate financing. |
We may not be able to find suitable sites for the development of solar projects.
Solar projects require solar and geological conditions that are not available in all areas. Further, large, utility scale solar projects must be interconnected to the power grid in order to deliver electricity, which requires us to find suitable sites with capacity on the power grid available. We may encounter difficulties registering certain leasehold interest in such sites. Even when we have identified a desirable site for a solar project, our ability to obtain site control with respect to the site is subject to our ability to finance the transaction and growing competition from other solar power producers that may have better access to local government support or financial or other resources. If we are unable to find or obtain site control for suitable sites on commercially acceptable terms, our ability to develop new solar projects on a timely basis or at all might be harmed, which could have a material adverse effect on our business, financial condition and results of operations. Moreover, our
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land leases for projects are typically for 30 to 35 years, but our PPAs are generally for a term of 25 years. If we are not able to sell the power produced by our systems after the initial PPA has expired, our liquidity and financial condition may be harmed.
We face uncertainties in our ability to acquire the rights to develop and generate power from new solar projects due to highly competitive PPA auctions and possible changes in the auction process.
We acquire the rights to develop and generate power from new solar projects through a competitive bidding process, in which we compete for project awards based on, among other things, pricing, technical and engineering expertise, financial conditions, including specified minimum net worth criteria, availability of land, financing capabilities and track record. The bidding and selection process is also affected by a number of factors, including factors which may be beyond our control, such as market conditions or government incentive programs. If we misjudge our competitiveness when submitting our bids or if we fail to lower our costs to submit competitive bids, we may not acquire the rights on new solar projects. Furthermore, we have expected prices for system components to decline as part of our bidding process, and if that does not occur, our project economics may be harmed and we may need greater subsidies to remain economically viable.
In addition, rules of the auction process may change. Each state in India has its own regulatory framework and several states have their own renewable energy policy. The rules governing the various regional power markets may change from time to time, in some cases, in a way that is contrary to our interests and adverse to our financial returns. For example, most national auctions currently use the reverse auction structure, in which several winners take part in the same project. There can be no assurance that the central and state governments will continue to allow us to utilize such bidding structures and any shift away from the current structures, such as to a Dutch auction, could increase the competition and adversely affect our business, results of operations and cash flows.
We face significant competition from traditional and renewable energy companies.
We face significant competition in the markets in which we operate. Our primary competitors are local and international developers and operators of solar projects and other renewable energy sources and including SunEdison, Inc., First Solar, Inc. and ACME Cleantech Solutions Private Limited. We also compete with utilities generating power from conventional fossil fuels. Recent deregulation of the Indian power sector and increased private sector investment have intensified the competition we face. The Electricity Act, 2003, or the Electricity Act, removed certain licensing requirements for power generation companies, provided for open access to transmission and distribution networks and also facilitated additional capacity generation through captive power projects. These reforms provide opportunities for increased private sector participation in power generation. Specifically, the open access reform enables private power generators to sell power directly to distribution companies and, ultimately, to the end consumers, enhancing the financial viability of private investment in power generation. Competitive bidding for power procurement further increases competition among power generators and recently there have been bids as low as Rs. 4.34 per kilowatt hour. We cannot assure you that we will be able to compete effectively, and our failure to do so could result in an adverse effect on our business, results of operations and cash flows.
Furthermore, our competitors may have greater operational, financial, technical, management or other resources than we do and may be able to achieve better economies of scale and lower cost of capital, allowing them to bid in the same auction at more competitive rates. Our competitors may also have a more effective or established localized business presence or a greater willingness or ability to operate with little or no operating margins for sustained periods of time. Our market position depends on our financing, development and operation capabilities, reputation and track record. Any increase in competition during the bidding process or reduction in our competitive capabilities could have a significant adverse impact on our market share and on the margins we generate from our solar projects.
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Our competitors may also enter into strategic alliances or form affiliates with other competitors to our detriment. As our competitors grow in scale, they may establish in-house engineering, procurement and construction, or EPC, and operations and maintenance, or O&M, capabilities, which may offset a current advantage we may have over them. Moreover, suppliers or contractors may merge with our competitors which may limit our choices of suppliers or contractors and hence the flexibility of our overall project execution capabilities. For example, some of our competitors may have their own internal solar panel manufacturing capabilities. As the solar energy industry grows and evolves, we will also face new competitors who are not currently in the market. There can be no assurance that our current or potential competitors will not win bids for solar projects or offer services comparable or superior to those that we offer at the same or lower prices or adapt to market demand more quickly than we do. Increased competition may result in price reductions, reduced profit margins and loss of market share.
In addition, we face competition from developers of other renewable energy facilities, including wind, biomass, nuclear and hydropower. If these non-solar renewable sources become more financially viable, our business, financial condition and results of operations could be adversely affected. Competition from such producers may increase if the technology used to generate electricity from these other renewable energy sources becomes more sophisticated, or if the Indian government elects to further strengthen its support of such renewable energy sources relative to solar energy. As we also compete with utilities generating power from conventional fossil fuels, a reduction in the price of coal or diesel would make the development of solar energy less economically attractive and we would be at a competitive disadvantage.
Any constraints in the availability of the electricity grid, including our inability to obtain access to transmission lines in a timely and cost-efficient manner, could adversely affect our business, results of operations and cash flows.
Distributing power to a purchaser is our responsibility. We generally rely on transmission lines and other transmission and distribution facilities that are owned and operated by the respective state governments or public entities. Where we do not have access to available transmission and distribution networks, we may engage contractors to build transmission lines and other related infrastructure. In such a case, we will be exposed to additional costs and risks associated with developing transmission lines and other related infrastructure, such as the ability to obtain right of way from land owners for the construction of our transmission lines, which may delay and increase the costs of our projects. We may not be able to secure access to the available transmission and distribution networks at reasonable prices, in a timely manner or at all.
Further, some of our projects may have limited access to transmission and distribution networks. Indias physical infrastructure, including its electricity grid, is less developed than that of many developed countries. As a result of grid constraints, such as grid congestion and restrictions on transmission capacity of the grid, the transmission and dispatch of the full output of our projects may be curtailed, particularly because we are required to distribute power to customers across long distances from our project sites. We may have to stop producing electricity during the period when electricity cannot be transmitted. Such events could reduce the net power generation of our projects. If construction of renewable energy projects outpaces transmission capacity of electricity grids, we may be dependent on the construction and upgrade of grid infrastructure by the government or public entities. We cannot assure you that the relevant government or public entities will do so in a timely manner, or at all. The curtailment of our power projects output levels will reduce our electricity output and limit operational efficiencies, which in turn could have an adverse effect on our business, results of operations and cash flows.
There are a limited number of purchasers of utility scale quantities of electricity, which exposes us and our utility scale projects to risk.
In fiscal year 2014 and 2015 and in the nine months ended December 31, 2015, we derived 99.9%, 97.2% and 88.5%, respectively, of our revenue from our top five customers, respectively. Since the transmission and
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distribution of electricity are either monopolized or highly concentrated in most jurisdictions, there are a limited number of possible purchasers for utility scale quantities of electricity in a given geographic location, including transmission grid operators and central and state run utilities. For instance, for projects established pursuant to the Jawaharlal Nehru National Solar Mission, or NSM, solar project developers are required to enter into PPAs with specified implementation agencies. As a result, there is a concentrated pool of potential buyers for electricity generated by our plants and projects, which may restrict our ability to negotiate favorable terms under new PPAs and could impact our ability to find new customers for the electricity generated by our generation facilities should this become necessary.
Furthermore, if the financial condition of these utilities and/or power purchasers deteriorate or the NSM or other solar policy to which they are currently subject and that compel them to source renewable energy supplies change, demand for electricity produced by our plants could be negatively impacted.
Counterparties to our PPAs may not fulfill their obligations, which could result in a material adverse impact on our business, financial condition, results of operations and cash flows.
We generate electricity income primarily pursuant to PPAs entered into with central and state government-run utilities. Some of the customers may become subject to insolvency or liquidation proceedings during the term of the relevant contracts, and the credit support received from such customers may not be sufficient to cover our losses in the event of a failure to perform. There may also be delays associated with collection of receivables from government owned or controlled entities on account of the financial condition of these entities that deteriorated significantly in the past. Where we are selling power to non-governmental entities, we take into account the credit ratings assigned by rating agencies and our ability in the past to collect when assessing the counterparties creditworthiness. Governmental entities to which we sell power do not have credit ratings, so there are no credit ratings to consider. For illustrative purposes, Moodys Investor Services Inc. and Standard and Poors Financial Services LLC have rated the Government of India Baa3 and BBB-, respectively. As a result, many of the state governments in India, if rated, would likely rate lower than the Government of India. Although the central and state governments in India have taken steps to improve the liquidity, financial condition and viability of state electricity distribution utility companies, there can be no assurance that the utility companies that are currently our customers will have the resources to pay on time or at all.
In addition, our PPA customers may, for any reason, become unable or unwilling to fulfill their related contractual obligations, refuse to accept delivery of power delivered thereunder or otherwise terminate such agreements prior to the expiration thereof. If such events occur, our assets, liabilities, business, financial condition, results of operations and cash flows could be materially and adversely affected. For instance, Gujarat Urja Vikas Nigam Limited had filed a petition with the Gujarat Electricity Regulatory Commission, seeking recalculation on the basis of actual cash flow required for development of solar projects and consequent revision of the tariff payable by it, in relation to certain solar power projects including our 10MW Gujarat 1 project. While the Gujarat Electricity Regulatory Commission and the Appellate Tribunal for Electricity dismissed the claims made by Gujarat Urja Vikas Nigam Limited, an appeal is pending with the Supreme Court of India.
Furthermore, to the extent any of our customers are, or are controlled by, governmental entities, bringing actions against them to enforce their contractual obligations is often difficult. Also, our facilities may be subject to legislative or other political action that may impair their contractual performance.
Our PPAs may expose us to certain risks that may affect our future results of operations and cash flows.
Our profitability is largely a function of our ability to manage our costs during the terms of our PPAs and operate our power projects at optimal levels. If we are unable to manage our costs effectively or operate our power projects at optimal levels, our business and results of operations may be adversely affected. In the event we default in fulfilling our obligations under the PPAs, such as supplying the minimum amount of power specified in some of the PPAs or failing to obtain regulatory approvals, licenses and clearances with respect to
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our solar projects, we may be liable for penalties and in certain specified events, customers may also terminate such PPAs. Further, any failure to supply power from the scheduled commercial operation date may result in encashment of bank guarantees provided by us under the terms of certain PPAs. The termination of any of our projects by our customers would adversely affect our reputation, business, results of operations and cash flows.
Under a long-term PPA, we typically sell power generated from a power plant to state distribution companies at pre-determined tariffs. Our PPAs are generally not subject to downward revisions unless we elect to utilize accelerated rate of depreciation or if there is a delay in commissioning our projects, although we have entered into contracts that provide for downward adjustments in the past and may do so in the future. Accordingly, if there is an industry-wide increase in tariffs or if we are seeking an extension of the term of the PPA, we will not be able to renegotiate the terms of the PPA to take advantage of the increased tariffs. In addition, in the event of increased operational costs, we will not have the ability to reflect a corresponding increase in our tariffs. Further, any delay in commissioning projects or supplying electricity during the term of the PPA may result in reduction in tariffs, based on the terms of the PPA. Therefore, the prices at which we supply power may have little or no relationship with the costs incurred in generating power, which may lead to fluctuations in our margins. The above factors all limit our business flexibility, expose us to an increased risk of unforeseen business and industry changes and could have an adverse effect on our business, results of operations and cash flows.
The term of some of our PPAs are also less than the life of the power projects they are tied to. We will need to enter into other offtake agreements, or seek renewals or extensions of the existing PPAs, for the balance of the life of those power projects. Moreover, there are often other restrictions on our ability to, among other things, sell power to third parties and undertake expansion initiatives with other consumers. Failure to enter into or renew offtake arrangements in a timely manner and on terms that are acceptable to us could adversely affect our business, results of operations and cash flows. There could also be negative accounting consequences if we are unable to extend or replace expiring PPAs, including writing down the carrying value of assets at such power project sites.
Additionally, under the PPAs, our remedies in case of delays in payment by our customers may also be limited. For example, certain PPAs only permit us to terminate the PPA on account of non-payment of dues upon 90 days of our inability to recover such dues. Such risks limit our business flexibility, expose us to an increased risk of unforeseen business and industry changes and could have an adverse effect on our business, results of operations and cash flows.
In addition, most of the government agencies we enter into PPAs with under the NSM or the relevant state policies require us to agree to their standard form contracts, and we cannot negotiate for commercial terms or other terms of funding that are more favorable to us.
Land title in India can be uncertain and we may not be able to identify or correct defects or irregularities in title to the land which we own, lease or intend to acquire in connection with the development or acquisition of our power projects. Additionally, certain land on which our power projects are located may be subject to onerous conditions which may adversely affect its use.
There is no central title registry for real property in India and the documentation of land records in India has not been fully computerized. Property records in India are generally maintained at the state and district level and in local languages, and are updated manually through physical records. Therefore, property records may not be available online for inspection or updated in a timely manner, may be illegible, untraceable, incomplete or inaccurate in certain respects, or may have been kept in poor condition, which may impede title investigations or our ability to rely on such property records. In addition, there may be a discrepancy between the duration of the principal lease under different orders issued by state governments in respect of a particular parcel of revenue land. Furthermore, title to land in India is often fragmented, and in many cases, land may have multiple owners. Title may also suffer from irregularities, such as non-execution or non-registration of conveyance deeds and
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inadequate stamping, and may be subjected to encumbrances that we are unaware of. Any defects in, or irregularities of, title may result in a loss of development or operating rights over the land, which may prejudice the success of our power projects and require us to write off substantial expenditures in respect of our power projects. For instance, a portion of land leased from the Government of Rajasthan for our projects in Nagaur, Rajasthan, is presently disputed as third parties have sought establishment of mining rights through the Mining Department of the State of Rajasthan. We have filed a petition with the High Court of Rajasthan to disallow such renewal. Presently, the High Court of Rajasthan has issued an injunction over the alleged claims on this land for mining.
Further, improperly executed, unregistered or insufficiently stamped conveyance instruments in a propertys chain of title, unregistered encumbrances in favor of third parties, rights of adverse possessors, ownership claims of family members of prior owners or third parties, or other defects that a purchaser may not be aware of can affect title to a property. As a result, potential disputes or claims over title to the land on which our power projects are or will be constructed, may arise. However, an adverse decision from a court or the absence of an agreement with such third-parties may result in additional costs and delays in the construction and operating phases of any solar projects situated on such land. Also, such disputes, whether resolved in our favor or not, may divert managements attention, harm our reputation or otherwise disrupt our business.
In addition, some properties used for our solar projects are subject to other third-party rights such as right of passage and right to place cables and other equipment on the properties, which may result in certain interferences with our use of the properties. Our rights to the properties used for our solar projects may be challenged by property owners and other third parties for various other reasons as well. For example, we do not always have the exclusive right to use a given site. Any such challenge, if successful, could impair the development or operations of our solar projects on such properties.
Additionally, the power projects that we may develop or acquire in the future may be located on land that may be subject to onerous conditions under the lease agreements through which we acquire rights to use such land and rights of way. Furthermore, the government may exercise its rights of eminent domain, or compulsory acquisition in respect of land on which our projects are or will be located. Any of this may adversely affect our business, results of operations and cash flows in the future.
A certain portion of the land on which our solar projects are or will be located, are not owned by us. In the event we are unable to purchase the land, or enter into or renew lease agreements, our business, results of operations, cash flows and financial condition could be adversely affected.
Some of our solar projects are located, or will be located, on revenue land that is owned by the state governments or on land acquired or to be acquired from private parties. The timeline for transfer of title in the land is dependent on the type of land on which the power projects are, or will be, located, and the policies of the relevant state government in which such land is located. In the case of land acquired from private parties, which is agricultural land, the transfer of such land from agriculturalists to non-agriculturalists such as us and the use of such land for non-agricultural purposes may require an order from the relevant state land or revenue authority allowing such transfer or use. For revenue land, we obtain a lease from the relevant government authority.
We cannot assure you that the outstanding approvals would be received, or that lease or sub-lease deeds would be executed in a timely manner, such that the operation of our solar projects will continue unaffected. In certain cases, any delay in the construction or commissioning of a solar project may result in termination of the lease. Further, the terms of lease and sub-lease agreements may also not be co-terminus with the lifetime of the power projects, taken together with the period of time required for construction and commissioning of the project. Accordingly, we will have to obtain extensions of the terms of such leases and sub-leases for the remainder of the terms of the corresponding PPAs. In the event that the relevant state authorities do not wish to renew the lease or sub-lease agreements, we may be forced to remove our equipment at the end of the lease and our business, results of operations, cash flows and financial condition could be adversely affected.
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If sufficient demand for solar projects does not develop or takes longer to develop than we anticipate, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected.
The solar power market is at a relatively early stage of development in many of the markets that we have entered or intend to enter. This is especially true in the rooftop and micro-grid solar markets. The solar energy industry continues to experience improved efficiency and higher electricity output. However, trends in the solar energy industry are based only on limited data and may not be reliable. Many factors may affect the demand for solar projects in India, including:
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fluctuations in economic and market conditions that affect the viability of conventional and non-solar renewable energy sources; |
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the cost and reliability of solar projects compared to conventional and other renewable energy sources; |
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the availability of grid capacity to dispatch power generated from solar projects; |
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public perceptions of the direct and indirect benefits of adopting renewable energy technology; and |
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regulations and policies governing the electric utility industry that may present technical, regulatory and economic barriers to the purchase and use of solar energy. |
If market demand for solar projects fails to develop sufficiently, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected.
If we are unsuccessful in our efforts to establish and/or maintain our compliance with the local content requirements in certain states, our financial results could be adversely affected.
In some cases, we are required by the central government in national auctions to procure solar panels solely from Indian manufacturers. Certain states or others may, in the future, require us to procure a defined portion of our solar system components from their designated geographical locales. Such requirements are commonly referred to as local content requirements. In order to satisfy these local content requirements, we may need to undertake localization initiatives in such geographical locale. Some of our competitors with more significant capital resources may implement or expedite their own localization efforts in these geographical locale, and those efforts may result in competitive advantages for them. We may be faced with shortages or quality issues if projects we bid on impose local content requirements. Our costs may also be higher as a result of these requirements. Our failure to successfully implement appropriate localization initiatives, or otherwise acquire and maintain the capability to satisfy applicable local content requirements, could result in our losing business to our competitors and/or our breaching the terms of agreements, potentially resulting in damages, including monetary penalties. Depending on the value to us of lost business or the amounts of any contractual penalties, these consequences could have a material adverse effect on our results of operations and cash flows.
We may incur unexpected expenses if the suppliers of components in our solar projects default in their warranty obligations.
The solar panels, inverters, modules and other system components utilized in our solar projects are generally covered by manufacturers warranties, which are typically for five to 25 years. In the event any such components fail to operate as required, we may be able to make a claim against the applicable warranty to cover all or a portion of the expense or losses associated with the faulty component. However, the warranties may not be sufficient to cover all of our expense and losses. In addition, these suppliers could cease operations and no longer honor the warranties, which would leave us to cover the expense and losses associated with the faulty component. Our business, financial condition, results of operations and cash flows could be materially and adversely affected if we cannot recover the expense and losses associated with the faulty component from these warranty providers.
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Our construction activities may be subject to cost overruns or delays.
Construction of our solar projects may be adversely affected by circumstances outside of our control, including inclement weather, adverse geological and environmental conditions, a failure to receive regulatory approvals on schedule or third-party delays in providing supplies and other materials. Changes in project plans or designs, or defective or late execution may increase our costs from our initial estimates and cause delays. Increases in the prices of our materials may increase procurement costs. Labor shortages, work stoppages or labor disputes could significantly delay a project, increase our costs or cause us to breach our performance guarantees under our PPAs, particularly because strikes are not considered a force majeure event under many of our PPAs. Moreover, local political changes and delays, for instance, caused by state and local elections, as well as demonstrations or protests by local communities and special interest groups could result in, or contribute to, project time and cost overruns for us.
In addition, we sometimes utilize and rely on third-party sub-contractors to construct and install portions of our solar projects. If our sub-contractors do not satisfy their obligations or do not perform work that meets our quality standards or if there is a shortage of third-party sub-contractors or if there are labor strikes that interfere with the ability of our employees or contractors to complete their work on time or within budget, we could experience significant delays or cost overruns.
We may not be able to recover any of these losses in connection with construction cost overruns or delays. Certain PPAs require that we connect to the transmission grid by a certain date. If the solar project is significantly delayed, such PPAs may be terminated. In addition, if we are unable to meet our performance guarantees, most of our PPAs require us to pay liquidated damages to the offtaker in proportion to the amount of power not supplied, and also grant the offtaker a right to draw on bank guarantees posted by us, including up to 100% of certain bank guarantees. Also, certain PPAs provide that we are liable for government fines and penalties if we fail to deliver electricity required by the offtakers to meet their RPO requirements. Furthermore, in the case of projects with VGF, which is paid out typically over two to five years, if the project fails to generate power for a long period of time, the government agency can suspend the VGF and demand repayment of previously paid sums.
Any of the contingencies discussed above could lead us to fail to generate our expected return from our solar projects and result in unanticipated and significant revenue and earnings losses.
Operation of power generation facilities involves significant risks and hazards that could have a material adverse effect on our business, financial condition, results of operations and cash flows. We may not have adequate insurance to cover these risks and hazards.
Power generation involves hazardous activities, including delivering electricity to transmission and distribution systems. In addition to natural risks such as earthquake, flood, lightning, hurricane and wind, other hazards, such as fire, structural collapse and machinery failure are inherent risks in our operations. These and other hazards can cause significant personal injury or loss of life, severe damage to and destruction of property, plant and equipment and contamination of, or damage to, the environment and suspension of operations. The occurrence of any one of these events may result in our being named as a defendant in lawsuits asserting claims for substantial damages, including for environmental cleanup costs, personal injury and property damage and fines and/or penalties. We maintain an amount of insurance protection that we consider adequate but we cannot provide any assurance that our insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject. Furthermore, our insurance coverage is subject to deductibles, caps, exclusions and other limitations. A loss for which we are not fully insured could have a material adverse effect on our business, financial condition, results of operations or cash flows. Further, due to rising insurance costs and changes in the insurance markets, we cannot provide any assurance that our insurance coverage will continue to be available at all or at rates or on terms similar to those presently available. Any losses not covered by insurance could have a material adverse effect on our business, financial condition, results of operations and cash flows.
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Maintenance and expansion of power generation facilities involve significant risks that could result in reduced power generation and financial output.
Our facilities may require periodic upgrading and improvement. Any unexpected operational or mechanical failure, including failure associated with breakdowns and forced outages, and any decreased operational or management performance, could reduce our facilities generating capacity below expected levels and reduce our revenues as a result of generating and selling less power. Degradation of the performance of our solar facilities above levels provided for in the related PPAs may also reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may also reduce profitability, especially because our costs are fixed in the PPAs and we may not pass through any unexpected costs in relation to the projects to our customers. Furthermore, we are not able to mitigate such project risks by shifting some or all of the risk to a third-party EPC or O&M contractor since we provide these services in-house.
Changes in technology may require us to make additional capital expenditures to upgrade our facilities. The development and implementation of such technology entails technical and business risks and significant costs of employee implementation.
The loss of one or more members of our senior management or key employees may adversely affect our ability to implement our strategy.
Our future success depends on the continued services and performances of the members of our management in our business for project implementations, management and running of our daily operations and the planning and execution of our business strategy. We depend on our experienced management team, and the loss of one or more key executives could have a negative impact on our business. In particular, we are dependent on the services of Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa, and the loss of either, including the loss of Mr. Harkanwal Singh Wadhwa as a result of an adverse outcome of the pending litigation against him described in Management could adversely impact our business. We also depend on our ability to retain and motivate key employees and attract qualified new employees. Neither our executive officers nor our key employees are bound by employment agreements for any specific term, and we may be unable to replace key members of our management team and key employees in the event we lose their services. There is intense competition for experienced management personnel with technical and industry expertise in the renewable energy business and if we lose the services of any of these individuals and are unable to find suitable replacements in a timely manner, our ability to realize our strategic objectives could be impaired. Integrating new employees into our management team could prove disruptive to our operations, require substantial resources and management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient managerial personnel who have critical industry experience and relationships could limit or delay our strategic efforts, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The generation of electricity from solar sources depends heavily on suitable meteorological conditions. If solar conditions are unfavorable, our electricity generation, and therefore revenue from our solar projects, may be substantially below our expectations.
The electricity produced and revenues generated by our solar projects are highly dependent on suitable solar conditions and associated weather conditions, which are beyond our control. Furthermore, components of our systems, such as solar panels and inverters, could be damaged by severe weather, such as hailstorms, tornadoes or lightning strikes. We generally will be obligated to bear the expense of repairing the damaged solar energy systems that we own, and replacement and spare parts for key components may be difficult or costly to acquire or may be unavailable. Unfavorable weather and atmospheric conditions could impair the effectiveness of our assets or reduce their output beneath their rated capacity or require shutdown of key equipment, impeding operation of our solar assets and our ability to achieve certain performance guarantees pursuant to our PPAs, forecasted revenues and cash flows. Sustained unfavorable weather could also unexpectedly delay the installation of solar
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energy systems, which could result in a delay in us acquiring new projects or increase the cost of such projects. We guarantee the performance of our solar power plants and could suffer monetary consequences if our plants do not produce to our contracted levels.
We base our investment decisions with respect to each solar project on the findings of related solar studies conducted on-site prior to construction. However, actual climatic conditions at a project site may not conform to the findings of these studies and therefore, our facilities may not meet anticipated production levels or the rated capacity of our generation assets, which could adversely affect our business, financial condition, results of operations and cash flows.
Fluctuations in foreign currency exchange rates may negatively affect our revenue, cost of sales and gross margins and could result in exchange losses.
As the functional currency of our Indian subsidiaries is the Indian rupee, our operating expenses are denominated primarily in Indian rupees. However, some of our capital expenditures, and particularly those for equipment imported from international suppliers, such as solar panels, are denominated in foreign currencies. To the extent that we are unable to match revenue received in our functional currency with costs paid in foreign currencies, exchange rate fluctuations in any such currency could have an adverse effect on our profitability. Substantially all of our cash flows are generated in Indian rupees and, therefore, significant changes in the value of the Indian rupee relative to the other foreign currencies could have a material adverse effect on our financial condition and our ability to meet interest and principal payments on debts. In addition to currency translation risks, we incur currency transaction risks whenever we or one of our projects enter into a purchase or sales transaction using a currency other than the Indian rupee. We expect our future capital expenditures in connection with our proposed expansion plans to include significant expenditures in foreign currencies for imported equipment and machinery.
A significant fluctuation in the Indian rupee and U.S. dollar and other foreign currency exchange rates could therefore have a significant impact on our other results of operations. The exchange rate between the Indian rupee and these currencies, primarily the U.S. dollar, has fluctuated in the past and any appreciation or depreciation of the Indian rupee against these currencies can impact our profitability and results of operations. Our results of operations have been impacted by such fluctuations in the past and may be impacted by such fluctuations in the future. For example, the Indian rupee has depreciated against the U.S. dollar over the past year, which may impact our results of operations in future periods. Such depreciation impacts the value of your investment. Furthermore, we have borrowings denominated in U.S. dollars and, as such, an annual decline in the rupee against the U.S. dollar effectively adds to the functional interest rate of our borrowings. Any amounts we spend in order to hedge the risks to our business due to fluctuations in currencies may not adequately hedge against any losses we incur due to such fluctuations.
The accounting treatment for many aspects of our solar projects is complex and any changes to the accounting interpretations or accounting rules governing our solar projects could have a material adverse effect on our GAAP reported results of operations and financial condition.
The accounting treatment for many aspects of our solar projects is complex, and our future results could be adversely affected by changes in the accounting treatment applicable to our solar projects. In particular, any changes to the accounting rules regarding the following matters may require us to change the manner in which we operate and finance our solar projects:
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foreign loans accounting; |
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derivative contracts; |
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asset retirement obligations; |
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share based compensation; |
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revenue recognition and related timing; |
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accounting for convertible debt and equity instruments; |
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income taxes; |
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foreign holding company tax treatment; |
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regulated operations; and |
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government grants. |
Our international corporate structure and operations require us to comply with anti-corruption laws and regulations of the United States government and various non-U.S. jurisdictions. The implementation of compliance procedures and related controls may be time consuming and expensive, and if we are not in compliance with applicable legal requirements, we may be subject to civil or criminal penalties and other remedial measures.
Following this offering, we will be subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, which prohibits, in relevant part, U.S. nationals, companies that have securities registered in the U.S. and any officer, director, employee, or agent of such issuer or any shareholder thereof acting on behalf of such issuer from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment and imposes obligations to keep accurate books and records and maintain appropriate internal controls. We have been and will continue to be subject to anti-corruption, anti-bribery and anti-facilitation payment legislation in other jurisdictions, which in certain circumstances go beyond the scope of the FCPA rules and regulations, including in India.
The current and future jurisdictions in which we operate our business may have experienced governmental corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery and anti-facilitation payment laws may conflict with local customs and practices, which is likely to negatively impact our results of operations. We are currently in the process of developing and implementing formal controls and procedures to ensure that we are in compliance with the FCPA and similar U.S. laws and regulations as well as similar anti-corruption, anti-bribery and anti-facilitation payment laws and regulations in non-U.S. jurisdictions. Compliance with these new controls and procedures could make it more difficult for us to obtain timely permits or otherwise complete our projects on schedule in jurisdictions where strict compliance with anti-corruption and anti-bribery laws may conflict with local customs and practices.
Any historic or future violations of these laws, regulations and procedures by our employees, independent contractors, subcontractors and agents could be costly and time-consuming to investigate and expose us to administrative, civil or criminal penalties or fines (including under U.S. and Indian laws and regulations as well as foreign laws). If we were to be investigated for, charged with, or convicted of, violating these laws and regulations, our reputation could be harmed and it could cause some of our investors to sell their interests in our company to be consistent with their internal investment policies or to avoid reputational damage, and some investors might forego the purchase of our equity shares, all of which may negatively impact the trading prices of our equity shares. In addition, any administrative, civil or criminal penalties or fines could have a material adverse effect on our business results of operations and cash flows.
We may become involved in costly and time-consuming litigation and other regulatory proceedings, which require significant attention from our management.
We are not involved in any material litigation, administrative or arbitral proceedings. However, we may, in the ordinary course of our business, become involved in such proceedings. For example, we are, and may become subject to additional demands from Indian governmental or tax authorities, including, but not limited to, on account of differing interpretations of central and state tax statutes in India, which are extensive and subject to
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change from time to time. Changes in regulations or tax policies, or adoption of differing interpretations of existing provisions, and enforcement thereof by governmental, taxation or judicial authorities in India may become the subject of legal proceedings involving us from time to time.
Additionally, claims may be brought against or by us from time to time regarding, for example, defective or incomplete work, defective products, personal injuries or deaths, damage to or destruction of property, breach of warranty, late completion of work, delayed payments, intellectual property rights or regulatory compliance, and may subject us to litigation, arbitration and other legal proceedings, which may be expensive, lengthy, disruptive to normal business operations and require significant attention from our management.
If we were found to be liable on any of the claims against us, we would incur a charge against earnings to the extent a reserve had not been established for coverage. If amounts ultimately realized from the claims by us were materially lower than the balances included in our financial statements, we would incur a charge against earnings to the extent profit had already been accrued. Charges and write-downs associated with such legal proceedings could have a material adverse effect on our financial condition, results of operations and cash flow. Moreover, legal proceedings, particularly those resulting in judgments or findings against us, may harm our reputation and competitiveness in the market.
Employee shortages and rising employee costs may harm our business and increase our operation costs.
As of January 31, 2016, we employed 327 persons to perform a variety of functions in our daily operations. The low cost workforce in India provides us with a cost advantage. However, we have observed an overall tightening of the employee market and an emerging trend of shortage of skilled labor. Failure to obtain stable and dedicated employee support may cause disruption to our business that harms our operations. Furthermore, employee costs have increased in India in recent years and may continue to increase in the near future. To remain competitive, we may need to increase the salaries of our employees to attract and retain them. Our employee payroll and related costs amounted to US$1.6 million, and US$4.5 million in the nine months ended December 31, 2014 and 2015, respectively. Any increase in employee costs may harm our operating results, cash flows and financial condition.
Risks Related to Operations in India
Substantially all of our business and operations are located in India and we are subject to regulatory, economic, social and political uncertainties in India.
Substantially all of our business and employees are located in India, and we intend to continue to develop and expand our business in India. Consequently, our financial performance and the market price of our equity shares will be affected by changes in exchange rates and controls, interest rates, changes in government policies, including taxation policies, social and civil unrest and other political, social and economic developments in or affecting India.
An election or a new administration could result in uncertainty in the solar market, which could harm our operations. For example, we saw a slowdown in the solar market in fiscal year 2014 as a result of it leading up to an election year with uncertainty about the level of government support for solar initiatives going forward.
The Indian government has exercised and continues to exercise significant influence over many aspects of the Indian economy. Since 1991, successive Indian governments have generally pursued policies of economic liberalization and financial sector reforms, including by significantly relaxing restrictions on the private sector. Nevertheless, the role of the Indian central and state governments in the Indian economy as producers, consumers and regulators has remained significant and we cannot assure you that such liberalization policies will continue. The rate of economic liberalization could change, and specific laws and policies affecting solar power producers, foreign investments, currency exchange rates and other matters affecting investments in India could change as well, including exposure to possible expropriation, nationalization or other governmental actions.
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Further, protests against privatizations and government corruption scandals, which have occurred in the past, could slow the pace of liberalization and deregulation. A significant change in Indias policy of economic liberalization and deregulation or any social or political uncertainties could significantly harm business and economic conditions in India generally and our business and prospects.
The extent and reliability of Indian infrastructure could significantly harm our results of operations, cash flows and financial conditions.
Indias physical infrastructure is less developed than that of many developed nations. Any congestion or disruption with respect to communication systems or any public facility, including transportation infrastructure, could disrupt our normal business activity. Any deterioration of Indias physical infrastructure would harm the national economy, disrupt the transportation of people, goods and supplies, and add costs to doing business in India. These disruptions could interrupt our business operations and significantly harm our results of operations, cash flows and financial condition. For the risk of congestion or disruption with respect to Indias electricity grid and transmission lines, see Risks Related to Our Business and Our Industry Any constraints in the availability of the electricity grid, including our inability to obtain access to transmission lines in a timely and cost-efficient manner, could adversely affect our business, results of operations and cash flows.
A slowdown in economic growth in India could cause our business to suffer.
Since inception, all of our revenue has been derived directly from sales by AZI and its various other subsidiaries in India. In addition, the CIA World Factbook estimates that consumer inflation in India was approximately 10% in 2013 and approximately 8% in 2014. The performance and growth of our business are necessarily dependent on economic conditions prevalent in India, which may be significantly harmed by political instability or regional conflicts, a general rise in interest rates, inflation and economic slowdown elsewhere in the world or otherwise. The Indian economy also remains largely driven by the performance of the agriculture sector which depends on the quality of monsoon, which is difficult to predict. Although the Indian economy has continued to grow in the past few years, any future slowdown in the Indian economy or a further increase in inflation could have a material adverse effect on the demand for power and, as a result, on our financial condition, results of operations and cash flows.
Indias trade relationships with other countries and its trade deficit may significantly harm Indian economic conditions. If trade deficits increase or are no longer manageable because of an unexpected rise in global crude oil prices or otherwise, the Indian economy, and therefore our business, our financial performance and the price of our equity shares could be significantly harmed.
India also faces major challenges in sustaining its growth, which include the need for substantial infrastructure development and improving access to healthcare and education. If Indias economic growth cannot be sustained or otherwise slows down significantly, our business and prospects could be significantly harmed.
Stringent labor laws may harm our ability to have flexible human resource policies and labor union problems could negatively affect our processing capacity, construction schedules, cash flows and overall profitability.
India has stringent labor legislation that protects the interests of workers, including legislation that sets forth detailed procedures for dispute resolution and employee removal, imposes financial obligations on employers upon employee layoffs and regulates contract labor. These laws may restrict our ability to have human resource policies that would allow us to react swiftly to the needs of our business, discharge employees or downsize. We may also experience labor unrest in the future, which may delay our construction schedules or disrupt our operations. If such delays or disruptions occur or continue for a prolonged period of time, our processing capacity and overall profitability could be negatively affected. We also depend on third party contract labor. It is possible under Indian law that we may be held responsible for wage payments to these laborers if their
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contractors default on payment. We may be held liable for any non-payment by contractors and any such order or direction from a court or any other regulatory authority may harm our business, results of our operations and cash flows.
Foreign investment laws in India includes certain restrictions, which may affect our future acquisitions or investments in India.
India regulates ownership of Indian companies by non-residents, although some restrictions on foreign investment have been relaxed in recent years. Under current Indian regulations, transfers of shares between non-residents and residents are permitted (subject to certain exceptions) if they comply with, among other things, the guidelines specified by the Reserve Bank of India in relation to pricing and valuation of such shares and certain reporting requirements for such transactions specified by the Reserve Bank of India. If the transfer of shares is not in compliance with such pricing guidelines or reporting requirements, or falls under any of the exceptions specified by the Reserve Bank of India, the prior approval of the Reserve Bank of India will be required before any such transfer may be consummated. We may not be able to obtain any required approval from the Reserve Bank of India or any other Indian regulatory authority on any particular terms or at all.
For example, under its consolidated foreign direct investment policy, the Indian government has set out additional requirements for foreign investments in India, including requirements with respect to downstream investments by Indian companies owned or controlled by non-resident entities and the transfer of ownership or control, from resident Indian persons or entities to non-residents, of Indian companies in sectors with limits on foreign investment. As substantially all of AZIs equity shares will continue to be directly held by Azure Power Global Limited, it would be considered an entity owned and controlled by non-residents under applicable Indian laws. Accordingly, any downstream investment by Azure Power Global Limited into another Indian company will have to be in compliance with conditions applicable to such Indian entity, in accordance with the consolidated foreign direct investment policy. There are guidelines in relation to pricing and valuation of shares and restrictions on sources of funding for such investments. While these guidelines currently do not materially limit our planned investments in our Indian subsidiaries, to the extent they become more restrictive, they may restrict our ability to make further equity investments in India, including through Azure Power Global Limited.
Further, Indias Foreign Exchange Management Act, 1999, as amended, and the rules and regulations promulgated thereunder prohibit us from borrowing from our Indian subsidiaries. We are permitted to lend to our Indian subsidiaries subject to compliance with Indias policy on external commercial borrowings as notified by the Reserve Bank of India from time to time, which specifies certain conditions, including in relation to eligible lenders and borrowers, permitted end use and limits on the all-in-cost.
Changing laws, rules and regulations and legal uncertainties, including adverse application of corporate and tax laws, may adversely affect our business, financial condition, results of operations, cash flows and prospects.
The regulatory and policy environment in which we operate is evolving and subject to change. Such changes, including the instances mentioned below, may adversely affect our business, financial condition, results of operations, cash flows and prospects, to the extent that we are unable to suitably respond to and comply with any such changes in applicable law and policy.
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The notified provisions of the Companies Act, 2013, together with the rules thereunder, or the Companies Act, contain significant changes to Indian company law, including in relation to the issue of capital by companies, related party transactions, corporate governance, audit matters, shareholder class actions and restrictions on the number of layers of subsidiaries. The Companies Act has also introduced certain additional requirements, including the introduction of a provision allowing the initiation of class action suits in India against companies by shareholders or depositors, a restriction on investment by an Indian company through more than two layers of subsidiary investment companies (subject to certain |
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permitted exceptions), and prohibitions on advances to directors. Moreover, effective April 1, 2014, companies exceeding certain net worth, revenue or profit thresholds are required to spend at least 2% of average net profits from the immediately preceding three fiscal years on corporate social responsibility projects, failing which an explanation is required to be provided in such companies annual reports. Further, the Companies Act imposes greater monetary and other liability on Indian companies, their directors and officers for any non-compliance of its requirements. We may incur increased costs and other burdens to interpret and ensure our compliance with these new requirements, which may also require significant management time and other resources. Any failure to comply may also adversely affect our business and results of operations. |
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The Companies Act also requires auditors to report on the adequacy and operating effectiveness of the internal financial controls over financial reporting as of March 31, 2016. The implementation of an internal financial control framework and related controls may be time consuming and expensive, and if a deficiency in our controls is identified, we may report material weakness in our internal control over financial reporting which may reduce the reliability of our financial reporting, harm investor confidence in our company and affect the value of our equity shares. |
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The Indian government has proposed a comprehensive national goods and services tax that will combine taxes and levies by the central and state governments into a unified rate structure. In this regard, a bill has been introduced and is pending approval of the Indian Parliament. While the central and state governments have announced that all committed incentives will be protected following the implementation of the goods and services tax, given the limited availability of information in the public domain concerning the goods and services tax, we are unable to provide any assurance as to this or any other aspect of the tax regime following implementation of the goods and services tax. These amendments may affect the overall tax efficiency of companies operating in India and may result in significant additional taxes becoming payable. |
We have not determined the impact of these recent and proposed legislations on our business. Uncertainty in the applicability, interpretation or implementation of any amendment to, or change in, governing law, regulation or policy in the jurisdictions in which we operate, including by reason of an absence, or a limited body, of administrative or judicial precedent may be time consuming as well as costly for us to resolve and may impact the viability of our current business or restrict our ability to grow our business in the future.
Natural calamities could have a negative impact on the Indian economy and adversely affect our business and project operations.
India has experienced natural calamities such as earthquakes, tsunamis, floods and drought in the past few years. In December 2004, Southeast Asia, including both the eastern and western coasts of India, experienced a massive tsunami, and in October 2005, the State of Jammu and Kashmir experienced an earthquake, both of which events caused significant loss of life and property damage. In June 2013, the state of Uttarakhand in northern India experienced widespread floods and landslides. Similarly, in December 2015, some regions in South India were severely impacted by floods. The extent and severity of these natural disasters determines their impact on the Indian economy. If climatic conditions or natural disasters occur in areas where our solar projects and project teams are located, project development, connectivity to the power grid and the provision of O&M services may be adversely affected. In particular, materials may not be delivered as scheduled and labor may not be available. Substantially all of our operations and employees are located in India and there can be no assurance that we will not be adversely affected by natural disasters in the future.
In recent years, certain regions of the world, including India, have experienced outbreaks of swine flu caused by the H1N1 virus. Any future outbreak of swine flu or other health epidemics, such as the outbreak of the Ebola virus, may restrict the level of business activity in affected areas which could adversely affect our business.
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Terrorist acts and other acts of violence involving India or other neighboring countries could significantly harm our operations directly, or may result in a more general loss of customer confidence and reduced investment in these countries that causes significant harm to our business, results of operations, cash flows and financial condition.
Terrorist attacks and other acts of violence or war involving India or other neighboring countries may significantly harm the Indian markets and the worldwide financial markets. The occurrence of any of these events may result in a loss of business confidence, which could potentially lead to economic recession and generally cause significant harm to our business, results of operations, cash flows and financial condition. In addition, any deterioration in international relations may result in investor concern regarding regional stability, which could decrease the price of our equity shares.
South Asia has also experienced instances of civil unrest and hostilities among neighboring countries from time to time. There have also been incidents in and near India such as terrorist attacks in Mumbai, Delhi and on the Indian Parliament, troop mobilizations along the India and Pakistan border and an aggravated geopolitical situation in the region. Such military activity or terrorist attacks in the future could significantly harm the Indian economy by disrupting communications and making travel more difficult. Resulting political tensions could create a greater perception that investments in Indian companies involve a high degree of risk. Furthermore, if India were to become engaged in armed hostilities, particularly hostilities that were protracted or involved the threat or use of nuclear weapons, we might not be able to continue our operations. Our insurance policies for a certain part of our business do not cover terrorist attacks or business interruptions from terrorist attacks or for other reasons.
Risks Related to Investments in Mauritian Companies
As our shareholder, you may have greater difficulties in protecting your interests than as a shareholder of a United States corporation.
We are incorporated under the laws of Mauritius. The laws generally applicable to United States corporations and their shareholders may provide shareholders of United States corporations with rights and protection for which there may be no corresponding or similar provisions under the Companies Act 2001 of Mauritius, as amended, or the Mauritius Companies Act. As such, if you invest in our equity shares, you may or may not be accorded the same level of shareholder rights and protection that a shareholder of a United States corporation may be accorded under the laws generally applicable to United States corporations and their shareholders. Taken together with the provisions of our constitution, which we expect to adopt with effect upon completion of this offering, or Constitution, some of these differences may result in your having greater difficulties in protecting your interests as our shareholder than you would have as a shareholder of a United States corporation. This affects, among other things, the circumstances under which transactions involving an interested director are voidable, whether an interested director can be held accountable for any benefit realized in a transaction with us, what rights you may have as a shareholder to enforce specified provisions of the Mauritius Companies Act or our Constitution, and the circumstances under which we may indemnify our directors and officers.
We may become subject to unanticipated tax liabilities that may have a material adverse effect on our results of operations.
We are a Mauritius Category 1 Global Business Company, or GBC1, and are tax resident in Mauritius. The Income Tax Act 1995 of Mauritius imposes a tax in Mauritius on the chargeable income of our company at the rate of 15%. However, under the Income Tax (Foreign Tax Credit) Regulations 1996 of Mauritius, subject to the Income Tax Act 1995 and the regulations under the Income Tax (Foreign Tax Credit) Regulations 1996, credit is allowed for foreign tax on the foreign source income of a resident of Mauritius against Mauritius tax computed by reference to the same income, and where credit is allowed against Mauritius tax chargeable in respect of any income, the amount of Mauritius tax so chargeable shall be reduced by the amount of the credit. Under the
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Income Tax (Foreign Tax Credit) Regulations 1996, foreign source income means income which is not derived from Mauritius and includes in the case of a corporation holding a GBC1 license, under the Financial Services Act 2007 of Mauritius, income derived in the course of a global business. Subject to the provisions of the Income Tax (Foreign Tax Credit) Regulations 1996, no credit is allowed in respect of foreign tax unless written evidence is presented to the Mauritius Revenue Authority showing the amount of foreign tax which has been charged and for this purpose, written evidence includes a receipt of the relevant authorities of the foreign country for the foreign tax or any other evidence that the foreign tax has been deducted or paid to the relevant authorities of that country. However, pursuant to regulation 8 of the Income Tax (Foreign Tax Credit) Regulations 1996, if written evidence is not presented to the Mauritius Revenue Authority showing the amount of foreign tax charged on our companys foreign source income, the amount of foreign tax shall nevertheless be conclusively presumed to be equal to 80% of the Mauritius tax chargeable with respect to that income and in such circumstance, the effective tax rate in Mauritius on our companys chargeable income would be 3%.
Following amendments to the Financial Services Act 2007 of Mauritius pursuant to the Finance (Miscellaneous Provisions) Act 2010 in December 2010, Mauritius companies holding a GBC1 issued by the Financial Services Commission in Mauritius are permitted to conduct business both in and outside Mauritius (instead of outside Mauritius only). The operations of a GBC1 company in Mauritius will be subject to tax on chargeable income at the rate of 15% in Mauritius.
We hold tax residence certificates issued by the Mauritius Revenue Authority. We believe that a significant portion of the income derived from our operations will not be subject to tax in countries in which we conduct activities or in which our customers are located, other than Mauritius and India. However, this belief is based on the anticipated nature and conduct of our business, which may change. It is also based on our understanding of our position under the tax laws of the countries in which we have assets or conduct activities. This position is subject to review and possible challenge by taxing authorities and to possible changes in law that may have retroactive effect. Our results of operations and cash flows could be materially and adversely affected if we become subject to a significant amount of unanticipated tax liabilities.
Anti-takeover provisions in our constitutional documents and under Mauritius law could make an acquisition of us, which may be beneficial to our shareholders, more difficult and may prevent attempts by our shareholders to replace or remove our current management and limit the market price of our equity shares.
Provisions in our Constitution may have the effect of delaying or preventing a change in control or changes in our management. Our Constitution includes the following provisions which may be regarded as defensive measures:
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a staggered board of directors; |
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the ability to issue additional equity shares (including blank check preferred stock); |
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granting directors the absolute discretion to decline to register a transfer of any shares; |
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requiring that amendments to our Constitution be approved by a special resolution of the shareholders of our company; and |
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limiting the liability of, and providing indemnification to, our directors and officers. |
These provisions may restrict or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors, which is responsible for appointing the members of our management team. The provisions could also deprive our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.
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Risks Related to Our Equity Shares and This Offering
In connection with the preparation of our consolidated financial statements for the fiscal years ended March 31, 2014 and 2015, we and our independent registered public accounting firm have identified a material weakness in our internal control over financial reporting. Although we expect to make every effort to address this material weakness, we may find that we are unable to improve our internal control over financial reporting sufficient to remediate this material weakness and, consequently, to maintain an effective system of internal control over financial reporting, which may reduce the reliability of our financial reporting, harm investor confidence in our company and affect the value of our equity shares.
We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in the second annual report we file with the SEC. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. However, our auditors will not be required to attest to and report on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, if we take advantage of the exemptions available to us through the JOBS Act. We are in the very early stages of the costly and challenging process of compiling the documentation necessary to perform the evaluation needed to comply with Section 404.
In connection with the preparation of our consolidated financial statements for the fiscal years ended March 31, 2014 and 2015, we and our independent registered public accounting firm have identified a material weakness in our internal control over financial reporting. The material weakness relates to our financial statement close process and the lack of sufficient financial accounting and reporting expertise commensurate with our financial reporting requirements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is reasonable possibility that a material misstatement of a companys annual or interim financial statements will not be prevented or detected on a timely basis.
We are currently in the process of remediating the material weakness and are taking numerous steps that we believe will address the underlying causes of the material weakness, primarily through the hiring of additional accounting and finance personnel with technical accounting and financial reporting experience, and strengthening controls around our financial statement close process. If we fail to effectively remediate deficiencies in our control environment or are unable to implement and maintain effective internal control over financial reporting and disclosure controls to meet the demands that will be placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, we may be unable to accurately report our financial results, or report them within the timeframes required by the U.S. Securities and Exchange Commission, or the SEC.
Even if we are able to report our financial statements accurately and in a timely manner, if we do not make all necessary improvements to address the material weakness, continued disclosure of a material weakness will be required in future filings with the SEC, which could cause our reputation to be harmed and our stock price to decline.
You may have difficulty enforcing judgments against us, our directors and management.
We are incorporated under the laws of Mauritius. Further, we conduct substantially all of our operations in India through our key operating subsidiary in India. The majority of our directors and officers, and some of the experts named in this prospectus, reside outside the United States, and a majority of our assets and some or all of the assets of such persons are located outside the United States. As a result, it may be difficult or impossible to effect service of process within the United States upon us or those persons, or to recover against us or them on judgments of United States courts, including judgments predicated upon the civil liability provisions of the United States federal securities laws. An award of punitive damages under a United States court judgment based upon United States federal securities laws is likely to be construed by Mauritian and Indian courts to be penal in
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nature and therefore unenforceable in both Mauritius and India. Further, no claim may be brought in Mauritius or India against us or our directors and officers in the first instance for violation of United States federal securities laws because these laws have no extraterritorial application under Mauritian or Indian law and do not have force of law in Mauritius or India. However, a Mauritian or Indian court may impose civil liability, including the possibility of monetary damages, on us or our directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Mauritian or Indian law. Moreover, it is unlikely that a court in Mauritius or India would award damages on the same basis as a foreign court if an action were brought in Mauritius or India or that a Mauritian or Indian court would enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with Mauritius or Indian practice or public policy.
The courts of Mauritius or India would not automatically enforce judgments of United States courts obtained in actions against us or our directors and officers, or some of the experts named herein, predicated upon the civil liability provisions of the United States federal securities laws, or entertain actions brought in Mauritius or India against us or such persons predicated solely upon United States federal securities laws. Further, there is no treaty in effect between the United States and Mauritius providing for the enforcement of judgments of United States courts in civil and commercial matters and the United States has not been declared by the Indian government to be a reciprocating territory for the purposes of enforcement of foreign judgments, and there are grounds upon which Mauritian or Indian courts may decline to enforce the judgments of United States courts. Some remedies available under the laws of United States jurisdictions, including remedies available under the United States federal securities laws, may not be allowed in Mauritian or Indian courts if contrary to public policy in Mauritius or India. Because judgments of United States courts are not automatically enforceable in Mauritius or India, it may be difficult for you to recover against us or our directors and officers or some experts named in this prospectus based upon such judgments. In India, prior approval of the Reserve Bank of India is required in order to repatriate any amount recovered pursuant to such judgments. See Enforceability of Civil Liabilities.
We do not expect to pay any cash dividends on our equity shares.
We have not paid dividends on any of our equity shares to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our equity shares are likely to be your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience a gain from your investment in our equity shares if the price of our equity shares increases.
In addition, our ability and decisions whether to pay dividends in the future will depend on our earnings, financial condition and capital requirements. Dividends to U.S. holders may be negatively affected by foreign currency fluctuations. We may not generate sufficient income to cover our operating expenses and pay dividends to our shareholders, or at all. Our ability to pay dividends also could be restricted under financing arrangements that we may enter into in the future and we may be required to obtain the approval of lenders in the event we are in default of our repayment obligations. We may be unable to pay dividends in the near or medium term, and our future dividend policy will depend on our capital requirements, financing arrangements, results of operations and financial condition. Dividends distributed by us will attract dividend distribution tax at rates applicable from time to time. See Dividends and Dividend Policy for further information.
Our holding company will have to rely principally on dividends and other distributions on equity paid by our operating subsidiaries and limitations on their ability to pay dividends to us could adversely impact your ability to receive dividends on our equity shares.
Since we cannot borrow from our Indian subsidiaries, dividends and other distributions on equity paid by our operating subsidiaries will be our principal source for cash in order for us to fund our operations including corporate expenses. While we will retain $5.0 million from the proceeds of this offering for general corporate purposes, this may not be sufficient to fund our operations. Accordingly, we may need to issue additional equity or borrow funds, either of which may be unavailable on attractive terms, if at all.
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If our operating subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to our holding company. As our key operating subsidiary is established in India, it is also subject to certain limitations with respect to dividend payments. As of the date of this prospectus, AZI has not paid any cash dividends on its equity shares and does not intend to pay dividends to its equity shareholders, including Azure Power Global Limited, in the foreseeable future. Moreover, upon completion of this offering, we will not own 100% of AZI and therefore any dividend payment made by AZI to us will also involve a payment to the other shareholders of AZI, including the Founders.
As a foreign private issuer, we are permitted to, and we will, follow certain home country corporate governance practices in lieu of certain requirements applicable to U.S. issuers. This may afford less protection to holders of our equity shares.
As a foreign private issuer who has applied for listing of our equity shares on the New York Stock Exchange, or NYSE, we are permitted to follow certain home country corporate governance practices in lieu of certain NYSE requirements. A foreign private issuer must disclose in its annual reports filed with the SEC, each NYSE requirement with which it does not comply followed by a description of its applicable home country practice. As a company incorporated in Mauritius and which expects to be listed on the NYSE, we may follow our home country practice with respect to the composition of our board of directors and nominations committee and executive sessions. Unlike the requirements of the NYSE, the corporate governance practice and requirements in Mauritius do not require us as a GBC1 to have the majority of our board of directors be independent; do not require us as a GBC1 to establish a nominations committee; and do not require us to hold regular executive sessions where only independent directors shall be present. Such Mauritian home country practices may afford less protection to holders of our equity shares than would be available to the shareholders of a U.S. corporation.
If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.
We expect to qualify as a foreign private issuer upon the closing of this offering. As a foreign private issuer, we will be exempt from a number of rules and regulations under the Securities Exchange Act of 1934, or the Exchange Act, applicable to U.S. domestic issuers, including the furnishing and content of proxy statements, compliance with the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act applicable to executive officers, directors and principal shareholders. We will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. domestic issuers, and we will not be required to disclose in our periodic reports all of the information that U.S. domestic issuers are required to disclose. While we currently expect to qualify as a foreign private issuer immediately following the closing of this offering, we may cease to qualify as a foreign private issuer in the future. If we do not qualify as a foreign private issuer, we will be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we will incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements that apply to other public companies.
We are an emerging growth company, as defined in the JOBS Act, enacted on April 5, 2012. For as long as we continue to be an emerging growth company, we may choose to take advantage of certain exemptions from reporting requirements applicable to other public companies that are not emerging growth companies. These include: (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) not being required to comply with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement
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to the auditors report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (3) not being required to comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, and (4) not being required to provide certain disclosure regarding executive compensation required of larger public companies. We could be an emerging growth company for up to five years from the end of our current fiscal year, although, if the market value of our equity shares that is held by non-affiliates exceeds US$700 million as of any September 30 before the end of that five-year period, we would cease to be an emerging growth company as of the following April 1. We cannot predict if investors will find our equity shares less attractive if we choose to rely on these exemptions. If some investors find our equity shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our equity shares and our share price may be more volatile. Further, as a result of these scaled regulatory requirements, our disclosure may be more limited than that of other public companies and you may not have the same protections afforded to shareholders of such companies.
You may be subject to Indian taxes on income arising through the sale of our equity shares.
Pursuant to recent amendments to the Indian Income Tax Act, 1961, as amended, income arising directly or indirectly through the sale of a capital asset, including any share or interest in a company or entity registered or incorporated outside of India, will be liable to tax in India, if such share or interest derives, directly or indirectly, its value substantially from assets (whether tangible or intangible) located in India and whether or not the seller of such share or interest has a residence, place of business, business connection, or any other presence in India. The share or interest of the company or entity registered or incorporated outside of India is deemed to derive its value substantially from the assets located in India if the value of such Indian assets exceeds Rs. 100 million and represents at least 50% of the value of all the assets owned by the company or entity registered or incorporated outside of India. Substantially all of our assets are located in India.
However, if the transferor of share or interest in a company or entity registered or incorporated outside of India (along with its associated enterprises), neither holds the right of management or control in the company or entity registered or incorporated outside of India nor holds voting power or share capital or interest exceeding 5% of the total voting power or total share capital or interest in the company or entity registered or incorporated outside of India, at any time during the twelve months preceding the date of transfer, such small shareholders are exempt from the indirect transfer provisions mentioned above. The amendments also do not deal with the interplay between the amendments to the Indian Income Tax Act, 1961, as amended, and the existing Double Taxation Avoidance Agreements that India has entered into with countries such as the United States in case of an indirect transfer. Accordingly, the implications of the recent amendments are presently unclear. If it is determined that these amendments apply to a holder of our equity shares, such holder could be liable to pay taxes in India on such income.
An active trading market for our equity shares may not develop and the trading price of our equity shares may fluctuate significantly.
Before this initial public offering, there was no public market for our equity shares. If an active public market for our equity shares does not develop after this offering, the market price and liquidity of our equity shares may be adversely affected. We cannot guarantee that a liquid public market for our equity shares will develop or be sustained after this offering.
The initial public offering price of our equity shares will be determined by negotiations between us and the underwriters and may not be indicative of prices that will prevail in the trading market following this offering. You may not be able to resell your equity shares at a price that is attractive to you. In addition, the market price of our equity shares could fluctuate significantly after this offering. In recent years, the stock market has experienced significant volatility. These and other factors may cause the market price and demand for our equity shares to fluctuate significantly, which may limit or prevent investors from readily selling their equity shares and may otherwise negatively affect the liquidity of our equity shares. In addition, in the past, when the market price
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of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from other business concerns.
Because the public offering price is substantially higher than our book value per equity share, you will incur immediate and substantial dilution.
The initial public offering price per equity share is substantially higher than the net tangible book value per equity share prior to this offering. Accordingly, if you purchase our equity shares in this offering, you will incur immediate dilution of approximately in the net tangible book value per equity share from the price you pay for our equity shares, representing the difference between (1) the assumed initial public offering price of US$ per equity share (the midpoint of the estimated offering price range set forth in the front cover of this prospectus) and (2) the pro forma net tangible book value per equity share of US$ on December 31, 2015 after giving effect to this offering. For more information, see Dilution.
The sale or availability for sale of substantial amounts of our equity shares could adversely affect their market price.
Sales of substantial amounts of our equity shares in the public market after the completion of this offering, or the perception that such sales could occur, could adversely affect the market price of our equity shares and could materially impair our future ability to raise capital through offerings of our equity shares.
We will have equity shares outstanding immediately after this offering or equity shares if the underwriters exercise their option to purchase additional equity shares in full. Further, although certain of our share option holders are subject to restrictions on selling shares acquired upon the exercise of options, the majority of the options granted under our equity option plan will continue to be exercisable following the completion of this offering. All of the equity shares sold in this offering will be freely tradable without restriction or further registration under the U.S. Securities Act of 1933, or the Securities Act, unless held by our affiliates as that term is defined in Rule 144 under the Securities Act. Subject to the 180-day lock-up restrictions described below and other applicable restrictions and limitations under Rule 144 of the Securities Act, all of our shares outstanding prior to this offering will be eligible for sale in the public market. If these shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our equity shares could decline.
In connection with this offering, we have agreed, subject to some exceptions, not to sell any equity shares for 180 days after the date of this prospectus without the written consent of the underwriters. However, the underwriters may release these equity shares from these lock-up restrictions at any time. We cannot predict what effect, if any, market sales of equity shares held by our significant shareholders or any other shareholder or the availability of these equity shares for future sale will have on the market price of our equity shares.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our equity shares adversely, our stock price and trading volume could decline.
The trading market for our equity shares is influenced by the research and reports that industry or securities analysts publish about us, our business, our market or our competitors. If any of the analysts who cover us or may cover us in the future change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who covers us or may cover us in the future were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
46
Future issuances of any equity securities may cause a dilution in your shareholding, decrease the trading price of our equity shares, and restrictions agreed to as part of debt financing arrangements may place restrictions on our operations.
Any issuance of equity securities after this offering could dilute the interests of our shareholders and could substantially decrease the trading price of our equity shares. We may issue equity or equity-linked securities in the future for a number of reasons, including to finance our operations and business strategy (including in connection with acquisitions and other transactions), to adjust our ratio of debt to equity, to satisfy our obligations upon the exercise of then-outstanding options or other equity-linked securities, if any, or for other reasons. Issuance of such additional securities may significantly dilute the equity interests of investors in this offering who will not have pre-emptive rights with respect to such an issuance, subordinate the rights of holders of equity shares if preferred shares are issued with rights senior to those afforded to our equity shares, or harm prevailing market prices for our equity shares.
Management will have considerable discretion as to the use of the net proceeds to be received by us from this offering.
Our allocation of the net proceeds to be received by AZI after the share subscription is based on current plans and business conditions. The amounts and timing of any expenditure will vary depending on the amount of cash generated by our operations and our success in future auctions. Accordingly, our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our results of operations or increase our share price. The net proceeds from this offering, pending investment in operating assets or solar projects, may be placed in investments that do not produce income or that lose value, which will cause the price of our equity shares to decline.
We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to certain U.S. investors of our equity shares.
A non-U.S. corporation will be a passive foreign investment company, or PFIC, for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. We do not expect to be a PFIC for U.S. federal income tax purposes for our current taxable year or future taxable years. However, our PFIC status is a factual determination made after the close of each taxable year that will depend, in part, on the composition of our income and assets, and thus, there can be no assurance that we will not be treated as a PFIC in our current taxable year or future taxable years. See Taxation U.S. Federal Income Taxation Passive Foreign Investment Company.
47
This prospectus contains forward looking statements about our current expectations and views of future events. All statements, other than statements of historical facts, contained in this prospectus, including statements about our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and future megawatt goals of management, are forward looking statements. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under Risk Factors, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. In some cases, these forward looking statements can be identified by words or phrases such as may, will, expect, anticipate, aim, estimate, intend, plan, believe, potential, continue, is/are likely to or other similar expressions.
These forward looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward looking statements reflect our current views about future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward looking statements because of a number of factors, including, without limitation, the risk factors set forth in Risk Factors and the following:
|
the pace of government sponsored auctions; |
|
changes in auction rules; |
|
the governments willingness to enforce Renewable Purchase Obligations, or RPOs; |
|
permitting, development and construction of our project pipeline according to schedule; |
|
solar radiation in the regions in which we operate; |
|
developments in, or changes to, laws, regulations, governmental policies, incentives and taxation affecting our operations; |
|
adverse changes or developments in the industry in which we operate; |
|
our ability to maintain and enhance our market position; |
|
our ability to successfully implement any of our business strategies; |
|
our ability to enter into power purchasing agreements, or PPAs, on acceptable terms, the occurrence of any event that may expose us to certain risks under our PPAs and the willingness and ability of counterparties to our PPAs to fulfill their obligations; |
|
our ability to borrow additional funds and access capital markets, as well as our substantial indebtedness and the possibility that we may incur additional indebtedness going forward; |
|
our ability to establish and operate new solar projects; |
|
our ability to compete against traditional and renewable energy companies; |
|
political and economic conditions in India; |
|
material changes in the costs of solar panels and other equipment required for our operations; |
|
fluctuations in inflation, interest rates and exchange rates; and |
|
other risks and uncertainties, including those listed under the caption Risk Factors. |
The forward looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward looking statements, whether as a result of new information, future events
48
or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits with the SEC, of which this prospectus is a part, completely and with the understanding that our actual future results or performance may be materially different from what we expect.
This prospectus also contains statistical data and estimates, including those relating to the solar industry and our competition from market research, analyst reports and other publicly available sources. These publications include forward looking statements being made by the authors of such reports. These forward looking statements are subject to a number of risks, uncertainties and assumptions. Actual results could differ materially and adversely from those anticipated or implied in the forward looking statements.
49
We estimate that we will receive net proceeds from this offering of approximately US$ million. These estimates are based upon an assumed initial offering price of US$ per equity share, the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts, commissions and aggregate offering expenses payable by us and assuming no exercise of the underwriters option to purchase additional equity shares and no other change to the number of equity shares offered by us as set forth on the cover page of this prospectus. A US$1.00 increase (decrease) in the assumed initial public offering price of US$ per equity share would increase (decrease) the net proceeds to us from this offering by US$ million. We will not receive any of the proceeds from the sale of equity shares by the selling shareholder.
We intend to use US$ million to fund the purchase by Azure Power Global Limited of equity shares to be issued by AZI, which will occur contemporaneously with the completion of this offering. Approximately US$5.0 million will be retained by Azure Power Global Limited to fund its future operating expenses. To the extent the underwriters exercise their option to purchase additional equity shares, the net proceeds from the sale of the additional equity shares will be used to purchase additional equity shares of AZI. See Prospectus Summary Corporate Structure. Net proceeds of US$ to be received by AZI pursuant to such purchase are intended to be used for project development, working capital needs and other general corporate purposes.
The foregoing use of our net proceeds from this offering represents our current intentions based upon our present plans and business condition. The amounts and timing of any expenditure will vary depending on the amount of cash generated by our operations and our success at solar auctions. Accordingly, our management will have significant discretion in the allocation of the net proceeds we will receive from this offering. Depending on future events and other changes in the business climate, we may determine at a later time to use the net proceeds for different purposes.
Pending the use of the net proceeds, AZI intends to hold the proceeds from the purchase of its equity shares by Azure Power Global Limited in short-term, interest-bearing debt instruments or demand deposits.
50
The consolidated financial statements and other financial data included in this prospectus of Azure Power Global Limited are presented in Indian rupees. Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Further, AZIs functional currency is Indian rupees. The functional currencies of AZIs subsidiaries are their respective local country currencies. The translation from the applicable foreign currencies of AZIs subsidiaries into Indian rupees is performed for balance sheet accounts using the exchange rate in effect as of the balance sheet date except for shareholders equity and preferred shares, which are translated at the historical rates in effect at the dates of the underlying transactions. Revenue, expense and cash flow items are translated using average exchange rates for the respective period.
U.S. dollar balances have been translated from Indian rupee amounts solely for the convenience of the readers. The following table sets forth, for each of the periods indicated, the low, average, high and period-end noon buying rates in The City of New York for cable transfers, in Indian rupees per U.S. dollar, as certified for customs purposes by the Federal Reserve Bank of New York. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in preparation of our consolidated financial statements or elsewhere in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. We make no representation that any Indian rupee or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Indian rupees, as the case may be, at any particular rate or at all.
Indian Rupees per
U.S. Dollar Noon Buying Rate |
||||||||||||||||
Period |
Period End | Average(1) | Low | High | ||||||||||||
2010 |
44.80 | 45.58 | 43.90 | 47.49 | ||||||||||||
2011 |
53.01 | 46.86 | 44.00 | 53.71 | ||||||||||||
2012 |
54.86 | 53.41 | 48.65 | 57.13 | ||||||||||||
2013 |
61.92 | 58.91 | 52.99 | 68.80 | ||||||||||||
2014 |
63.04 | 61.21 | 58.30 | 63.67 | ||||||||||||
2015: |
||||||||||||||||
August |
66.39 | 65.10 | 63.67 | 66.80 | ||||||||||||
September |
65.50 | 66.17 | 65.50 | 66.70 | ||||||||||||
October |
65.40 | 65.03 | 64.70 | 65.57 | ||||||||||||
November |
66.43 | 66.10 | 65.46 | 66.86 | ||||||||||||
December |
66.19 | 66.50 | 66.00 | 67.10 | ||||||||||||
2016: |
||||||||||||||||
January |
67.87 | 67.33 | 66.49 | 68.68 | ||||||||||||
February (through February 5, 2016) |
67.78 | 67.82 | 67.57 | 67.92 |
(1) | Averages for a period other than one month are calculated by using the average of the noon buying rate at the end of each month during the period. Monthly averages are calculated by using the average of the daily noon buying rates during the relevant month. |
Source: Federal Reserve Statistical Release.
51
Since our incorporation, no dividends have been declared or paid on our equity shares. We currently intend to retain our earnings, if any, to finance the development and growth of our business and operations as well as expand our business and do not currently anticipate paying dividends on our equity shares in the near future.
Under Mauritius law, we may only pay dividends out of retained earnings, after having made good any accumulated losses at the beginning of the relevant accounting period and no distribution (which includes dividends) may be made unless our board of directors is satisfied that upon the distribution being made, our company is able to pay its debts as they become due in the normal course of business and the value of our companys assets is greater than the sum of the value of its liabilities and our companys stated capital (which refers to the total of all amounts received by our company or due and payable to our company in respect of the nominal paid-up value of our issued shares and share premiums paid to our company in relation to such shares). Subject to the Mauritius Companies Act and our constitution, which we expect to adopt with effect upon completion of this offering, the declaration and payment of any dividend has to be authorized by our board of directors and is subject to the approval of our shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, cash flows, capital requirements, general financial condition, contractual restrictions and other factors which our directors may deem relevant. We expect that cash dividends, if any, will be paid to U.S. holders in U.S. dollars. Other distributions, if any, will be made to our shareholders by any means which our directors deem fair, legal and practicable. Any dividend or distribution out of retained earnings unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to us and the payment by our board of directors of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute us a trustee in respect thereof.
As we are a holding company, we will have to rely on dividends paid to us by our subsidiaries (in particular, our key operating subsidiary in India, AZI) for our cash requirements, including funds to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. Our ability to pay dividends to our shareholders will depend on, among other things, the availability of dividends from AZI.
As of the date of this prospectus, AZI has not paid any cash dividends on its equity shares and does not intend to pay dividends to its equity shareholders, including Azure Power Global Limited, in the foreseeable future. Even if we decide it should, since we will not own all of AZI following the consummation of this offering and the use of the proceeds therefrom, we will not receive all of the dividends paid by AZI. Rather, we will receive a dividend in proportion to our ownership interest in AZI, which will be approximately % following consummation of this offering, assuming an offer price of the midpoint of the estimated price range listed on the cover page of this prospectus. The Founders will receive the balance of any dividend paid by AZI.
Dividends other than in cash are not permitted under Indian law. The declaration and payment of any dividends in the future will be recommended by the board of directors of AZI and approved by the shareholders of AZI at their discretion and would depend on a number of factors, including its financial condition, results of operations, capital requirements and surplus, profits, contractual obligations, applicable Indian legal restrictions, the provisions of its articles of association, restrictive covenants under the terms of its credit facilities and other financing arrangements at the time a dividend is considered, and other factors considered relevant by the board of directors. AZI would be required to pay dividend distribution tax in India at 17.30% on the total amount distributed as a dividend as grossed up by the amount of such dividend distribution tax.
52
In accordance with the Companies Act, and the rules framed thereunder, an Indian company is permitted to declare or pay dividends in any year only in cash and out of profits for that year after providing for depreciation, in the manner prescribed. In the event of inadequacy or absence of profits in a particular year, dividends may be paid out of the accumulated profits of the company (after providing for depreciation) which remain undistributed and transferred to the companys free reserves, subject to the following conditions:
|
the rate of dividend declared does not exceed the average of the rates at which declared by the company in the preceding three years (except where no dividends have been declared in each of the preceding three years); |
|
the total amount drawn up from the accumulated profits does not exceed 1/10 th of the sum of the companys paid-up share capital and free reserves, as indicated in its latest audited financial statements; |
|
the amount drawn up from the accumulated profits is first utilized to set-off the losses incurred in the fiscal year in which the dividend is proposed to be declared; and |
|
the balance of reserves after such withdrawal does not fall below 15% of the companys paid-up share capital, as indicated in its latest audited financial statements. |
53
The following table sets forth our capitalization on a consolidated basis as of December 31, 2015 on:
|
an actual basis, which excludes equity shares issuable upon exercise of outstanding stock options at a weighted average price of Rs. (US$ ) per share under our 2015 Employee Stock Option Plan; |
|
a pro forma basis to reflect the following: |
|
the conversion of compulsorily convertible preferred shares and compulsorily convertible debentures into an aggregate of equity shares based on an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus; and |
|
the effectiveness of a -for- stock split of our equity shares. |
|
a pro forma as adjusted basis to further reflect the following transactions that will occur substantially contemporaneously with the completion of this offering: |
|
our sale of equity shares by us in this offering and our receipt of the estimated net proceeds from such issuance and sale in this offering, each based on an assumed initial public offering price of US$ per equity share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, as if such transactions had occurred on December 31, 2015; and |
|
the share subscription by Azure Power Global Limited of additional shares of AZI with substantially all of the net proceeds of US$ million of this offering (other than approximately US$5.0 million to be retained by Azure Power Global Limited to fund its future operating expenses). |
54
You should read this table in conjunction with the information under Use of Proceeds, Selected Consolidated Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus.
As of December 31, 2015 | ||||||||||||||||||||||||
Actual | Actual | Pro Forma(1) | Pro Forma(1) |
Pro
Forma Adjusted(1) |
Pro
Forma Adjusted(1) |
|||||||||||||||||||
Rs. | U.S.$ | Rs. | U.S.$ | Rs. | U.S.$ | |||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||||
Cash and Cash equivalents |
3,744,450 | 56,571 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Debt |
22,127,479 | 334,301 | ||||||||||||||||||||||
Compulsory convertible preferred shares (805,462 shares issued and outstanding, actual; 0 shares issued and outstanding, pro forma; and 0 shares issued and outstanding, pro forma as adjusted) |
9,461,436 | 142,944 | | | | | ||||||||||||||||||
Redeemable non-controlling interest |
335,765 | 5,073 | ||||||||||||||||||||||
Stockholders Equity |
||||||||||||||||||||||||
Common Stock US$0.01 par value (109,880 shares issued and outstanding, actual; 0 shares issued and outstanding, pro forma; and 0 shares issued and outstanding, pro forma as adjusted) (2) |
68 | 1 | ||||||||||||||||||||||
Additional paid in capital |
(2,688,640 | ) | (40,620 | ) | ||||||||||||||||||||
Accumulated deficit |
(3,899,746 | ) | (58,917 | ) | ||||||||||||||||||||
Accumulated other comprehensive income |
28,036 | 424 | ||||||||||||||||||||||
Non-controlling interest |
(4,312 | ) | (65 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total shareholders (deficit) equity |
(6,564,594 | ) | (99,177 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Capitalization |
25,360,086 | 383,141 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Each US$1.00 increase or decrease in the assumed initial public offering price of US$ per share, the mid-point of the price range on the cover page of this prospectus, would increase or decrease, respectively, the amount of cash, additional paid-in capital and total capitalization by approximately US$ , assuming the number of shares we offer, as stated on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commission and estimated offering expenses payable by us. |
(2) | As of December 31, 2015, Azure Power Global Limited had 109,880 shares issued and outstanding, actual; shares issued and outstanding, pro forma; and shares issued and outstanding, pro forma as adjusted). |
55
As of December 31, 2015, our pro forma net tangible book value was Rs. (or US$ ) per equity share. Pro forma net tangible book value per equity share represents the amount of our total tangible assets less the amount of our total liabilities, divided by the number of equity shares outstanding, after giving retroactive effect to the corporate formation transactions described under Prospectus Summary Corporate Structure, that will take place immediately prior to the closing of this offering and assuming a total of equity shares will be issued to the non-founder investors upon the conversion of convertible securities, based on an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus.
Dilution is determined by subtracting pro forma net tangible book value per equity share from the assumed public offering price per equity share.
Without taking into account any other changes in pro forma net tangible book value after December 31, 2015, other than giving effect to our sale of equity shares in the offering at an assumed initial public offering price of US$ per equity share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting underwriting discounts and commissions and estimated expenses of the offering payable by us, the pro forma net tangible book value per equity share would increase to US$ per equity share, or US$ per equity share if the underwriters over-allotment option is exercised in full. This represents an immediate increase in pro forma net tangible book value of US$ per equity share to our existing shareholders (or US$ per equity share if the underwriters over-allotment option is exercised in full), and an immediate dilution of US$ per equity share to purchasers of shares in the offering (or US$ per equity share if the underwriters over-allotment option is exercised in full).
The following table illustrates this dilution on a per equity share basis:
Assumed initial public offering price per equity share |
$ | |||
Pro forma net tangible book value per equity share as of December 31, 2015 before this offering |
$ | |||
Increase in pro forma net tangible book value per equity share attributable to the price paid by new investors |
$ | |||
Pro forma net tangible book value per equity share after this offering |
$ | |||
|
|
|||
Dilution per equity share to new investors in the offering |
$ | |||
|
|
A US$1.00 increase (decrease) in the assumed public offering price of US$ per equity share would increase (decrease) our pro forma net tangible book value after giving effect to the offering by US$ per equity share and the dilution in pro forma net tangible book value per equity share to new investors in this offering by US$ per equity share, assuming no change to the number of equity shares offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions.
The following table summarizes, on a pro forma basis as of December 31, 2015, the differences between our existing shareholders as of such date and the new investors with respect to the number of equity shares purchased from us, the total consideration paid and the average price per equity share paid at an assumed initial public offering price of US$ per equity share (the midpoint of the price range set forth on the cover page of this prospectus) before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
56
A US$1.00 increase (decrease) in the assumed initial public offering price of US$ per equity share would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and the average price per equity share paid by all shareholders by US$ million, US$ million and US$ , respectively, assuming no change in the number of equity shares sold by us as set forth on the cover page of this prospectus and without deducting underwriting discounts and commissions.
The discussion and tables above assume no exercise of any outstanding share options. As of the date of this prospectus, there are equity shares issuable upon exercise of outstanding stock options at a weighted-average exercise price of Rs. (US$ ) per share under our 2015 Employee Stock Option Plan, and there are equity shares available for future issuance upon the exercise of future grants under our 2015 Employee Stock Option Plan. To the extent that any of these options is exercised, there will be further dilution to new investors.
57
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL DATA
The selected consolidated and pro forma financial data below should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace the consolidated and pro forma financial statements and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this prospectus.
Azure Power Global Limited is a company incorporated in Mauritius and is the holding company of AZI. All of our operations are conducted currently through AZI and its subsidiaries. The proceeds of this offering will be used towards a share subscription of AZI by Azure Power Global Limited, which will occur contemporaneously with the completion of the offering.
The financial information in this section has been derived from the audited consolidated financial statements as of and for the years ended March 31, 2014 and 2015 included elsewhere in this prospectus.
The unaudited information for the nine months ended December 31, 2014 and 2015 was prepared on a basis consistent with that used to prepare our audited consolidated financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of our financial condition and results of operations with respect to the relevant periods.
The summary unaudited pro forma balance sheet data as of December 31, 2015 gives effect to (i) the conversion of compulsorily convertible preferred shares and compulsorily convertible debentures into equity shares and (ii) the effectiveness of a -for- stock split of our equity shares. The pro forma as adjusted balance sheet data as of December 31, 2015 reflect the abovementioned transactions, the issuance and sale of equity shares in this offering and the use of proceeds therefrom, based on an assumed offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
58
Our historical results are not necessarily indicative of the results that may be expected in any future period, and our interim results are not necessarily indicative of the results to be expected for the full fiscal year.
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(1) | Rs. | Rs. | US$(1) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Statement of Operations Data: |
||||||||||||||||||||||||
Operating revenue: |
||||||||||||||||||||||||
Sale of power |
881,345 | 1,124,138 | 16,984 | 767,362 | 1,858,911 | 28,084 | ||||||||||||||||||
Operating costs and expenses: |
||||||||||||||||||||||||
Cost of operations (exclusive of depreciation and amortization shown separately below) |
52,491 | 79,816 | 1,206 | 54,029 | 127,308 | 1,923 | ||||||||||||||||||
General and administrative expenses |
235,300 | 425,952 | 6,435 | 241,884 | 481,528 | 7,275 | ||||||||||||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | 218,016 | 495,647 | 7,488 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total operating cost and expenses |
540,143 | 828,198 | 12,512 | 513,929 | 1,104,483 | 16,686 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
341,202 | 295,940 | 4,472 | 253,433 | 754,428 | 11,398 | ||||||||||||||||||
Other expense: |
||||||||||||||||||||||||
Interest expense, net(2) |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
Loss on foreign currency exchange(3) |
580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other expenses |
1,100,785 | 1,131,418 | 17,094 | 932,559 | 1,726,401 | 26,082 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Loss before income taxes |
(759,583 | ) | (835,478 | ) | (12,622 | ) | (679,126 | ) | (971,973 | ) | (14,684 | ) | ||||||||||||
Income tax expense |
(15,847 | ) | (253,112 | ) | (3,824 | ) | (205,804 | ) | (89,427 | ) | (1,351 | ) | ||||||||||||
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Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | (884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||||||||
Net loss attributable to non-controlling interest(4) |
(26,935 | ) | (5,595 | ) | (85 | ) | (5,311 | ) | (8,633 | ) | (130 | ) | ||||||||||||
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Net loss attributable to APGL |
(748,495 | ) | (1,082,995 | ) | (16,361 | ) | (879,619 | ) | (1,052,767 | ) | (15,905 | ) | ||||||||||||
Accretion on Mezzanine CCPS(5) |
(366,552 | ) | (755,207 | ) | (11,410 | ) | (494,927 | ) | (1,076,087 | ) | (16,258 | ) | ||||||||||||
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Accretion to redeemable non-controlling interest(6) |
| | | | (18,837 | ) | (285 | ) | ||||||||||||||||
Net loss attributable to APGL equity shareholders |
(1,115,047 | ) | (1,838,202 | ) | (27,771 | ) | (1,374,546 | ) | (2,147,691 | ) | (32,448 | ) | ||||||||||||
Net loss per share attributable to equity shareholders |
||||||||||||||||||||||||
Basic and diluted(7) |
(10,241 | ) | (16,737 | ) | (253 | ) | (12,510 | ) | (19,546 | ) | (295 | ) | ||||||||||||
Shares used in computing basic and diluted per share amounts |
||||||||||||||||||||||||
Equity shares |
108,882 | 109,830 | | 109,880 | 109,880 | | ||||||||||||||||||
Proforma basic and diluted per share(8) |
||||||||||||||||||||||||
Proforma shares used in computing basic and diluted loss per share(8) |
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Supplemental information (unaudited): |
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Adjusted EBITDA(9) |
593,554 | 618,370 | 9,343 | 471,449 | 1,250,075 | 18,886 | ||||||||||||||||||
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(1) |
Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Further, AZIs functional and reporting currency is the Indian rupee. Solely for the convenience of the reader, we have translated the financial information as of and for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 into U.S. dollars. The rate used for this translation is Rs. 66.19 to US$1.00, which is the |
59
noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2015, which is the date of our last reported financial statements. |
(2) | Interest expense, net consists of: |
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(a) | Rs. | Rs. | US$(a) | |||||||||||||||||||
Interest expense: |
||||||||||||||||||||||||
Compulsorily convertible debentures |
217,751 | 248,831 | 3,759 | 202,051 | 238,113 | 3,597 | ||||||||||||||||||
Series E compulsorily convertible preferred shares |
74,700 | 96,500 | 1,458 | 71,242 | 157,355 | 2,377 | ||||||||||||||||||
Term loans |
316,519 | 598,845 | 9,048 | 374,806 | 1,108,360 | 16,745 | ||||||||||||||||||
Bank charges and other |
36,151 | 55,454 | 838 | 33,661 | 78,682 | 1,189 | ||||||||||||||||||
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645,121 | 999,630 | 15,103 | 681,760 | 1,582,510 | 23,908 | |||||||||||||||||||
Interest income: |
||||||||||||||||||||||||
Term deposits |
111,842 | 151,860 | 2,294 | 107,778 | 159,137 | 2,404 | ||||||||||||||||||
Interest income from related parties |
| 2,031 | 31 | | | | ||||||||||||||||||
Gain on sale of short term investments |
13,060 | 13,949 | 211 | 10,054 | 34,084 | 515 | ||||||||||||||||||
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Interest expense, net |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
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(a) | Refer to note (1) above. |
(3) | Loss on foreign currency exchange consists of: |
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(a) | Rs. | Rs. | US$(a) | |||||||||||||||||||
Unrealized loss on foreign currency loans |
578,571 | 240,656 | 3,636 | 319,778 | 345,474 | 5,219 | ||||||||||||||||||
Realized loss on foreign currency loans |
39,989 | (42,280 | ) | (639 | ) | (6,304 | ) | (46,429 | ) | (701 | ) | |||||||||||||
Unrealized loss on derivative instruments |
(16,384 | ) | 7,342 | 111 | (13,527 | ) | (2,364 | ) | (36 | ) | ||||||||||||||
Realized loss on derivative instruments |
(21,610 | ) | 93,910 | 1,419 | 68,684 | 40,431 | 611 | |||||||||||||||||
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580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | |||||||||||||||||||
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(a) | Refer to note (1) above. |
The unrealized and realized foreign exchange loss represents the foreign currency fluctuations on our non-Indian rupee denominated borrowings.
(4) | Represents a non-controlling interest of 20% in a subsidiary. |
(5) | Our Series A, Series B, Series C, Series D, Series F and Series H compulsorily convertible preferred shares, or collectively the Mezzanine CCPS, are being accreted to their redemption value through February 25, 2016, the earliest redemption date, to earn the mandatory redemption amount on such date. |
(6) | Represents accretion to the redeemable non-controlling interest in a subsidiary which is accreted to its accretion value. |
(7) | Basic and diluted net loss per share attributable to Azure Power Global Limited equity shareholders is computed by dividing the net loss attributable to Azure Power Global Limited equity shareholders by the weighted average number of equity shares outstanding for the period. The potentially dilutive compulsorily convertible preferred shares, compulsorily convertible debentures and share options were excluded from the calculation of dilutive loss per share in those periods where inclusion would be anti-dilutive. |
(8) |
Pro forma net loss per share attributable to Azure Power Global Limited equity shareholders for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 is calculated as if the |
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compulsorily convertible preferred shares and the compulsorily convertible debentures had been converted into equity shares at the beginning of the respective period presented or when compulsorily convertible preferred shares and compulsorily convertible debentures were issued, if later. Compulsorily convertible preferred shares and compulsorily convertible debentures upon the completion of this offering convert into (i) equity shares as of March 31, 2015 and (ii) equity shares as of December 31, 2015 based upon the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus. |
(9) | Adjusted EBITDA is a non-GAAP financial measure. We present Adjusted EBITDA as a supplemental measure of our performance. This measurement is not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. |
The following table presents a reconciliation of net loss to Adjusted EBITDA:
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$(a) | Rs. | Rs. | US$(a) | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | (884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||||||||
Income tax expense |
15,847 | 253,112 | 3,824 | 205,804 | 89,427 | 1,351 | ||||||||||||||||||
Interest expense, net |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | 218,016 | 495,647 | 7,488 | ||||||||||||||||||
Loss on foreign currency exchange |
580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | ||||||||||||||||||
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Adjusted EBITDA |
593,554 | 618,370 | 9,343 | 471,449 | 1,250,075 | 18,886 | ||||||||||||||||||
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(a) | Refer to note (1) above. |
As of December 31, | As of December 31, | |||||||||||||||
2015 |
2015
(Pro forma)(5) |
2015
(Pro forma as adjusted)(5) |
||||||||||||||
Rs. | US$(1) | Rs. | US$(1) | Rs. | US$(1) | |||||||||||
Balance Sheet Data |
||||||||||||||||
Cash and cash equivalents |
3,744,450 | 56,571 | ||||||||||||||
Property, plant and equipment, net |
21,058,666 | 318,155 | ||||||||||||||
Total assets |
29,270,158 | 442,214 | ||||||||||||||
Compulsorily convertible debentures and Series E & Series G preferred shares(2) |
3,340,619 | 50,470 | ||||||||||||||
Project level and other debt(3) |
17,038,860 | 257,423 | ||||||||||||||
Mezzanine CCPS shares(4) |
9,461,436 | 142,944 | ||||||||||||||
Total APGL shareholders deficit |
(6,560,282 | ) | (99,112 | ) |
(1) | Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Further, AZIs functional and reporting currency is the Indian rupee. Solely for the convenience of the reader, we have translated the financial information as of and for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 into U.S. dollars. The rate used for this translation is Rs. 66.19 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2015, which is the date of our last reported financial statements. |
(2) | The Series E and Series G compulsorily convertible preferred shares are classified as a current liability in the consolidated balance sheet because the preference shareholders have a right to convert their shares into a variable number of equity shares to give them their required returns. |
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(3) | This balance represents the short term and long-term portion of project level secured term loans and other secured bank loans. |
(4) | Compulsorily convertible preferred shares include the Mezzanine CCPS and are classified as temporary equity in the consolidated balance sheet. |
(5) | The pro forma and pro forma as adjusted columns in the balance sheet data reflects the transactions described in the last paragraph of page 13. |
The pro forma as adjusted information set forth in the table above is for illustrative purposes only and will be adjusted based on the actual initial public offering price and other terms of this offering as determined at pricing.
A US$1.00 increase or decrease in the assumed public offering price of US$ would increase or decrease each of pro forma as adjusted cash and cash equivalents, total assets, and total deficit by Rs. thousands (US$ ), assuming the number of shares offered by us, as set forth on the cover page of the prospectus, remains the same, after deducting estimated underwriting discounts and commissions that we expect to pay.
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MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements, the related notes to those statements and selected consolidated financial data included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Risk Factors and elsewhere in this prospectus. All forward looking statements in this document are based on information available to us as of the date hereof, and we assume no obligation to update any such forward looking statements. Unless otherwise indicated, the consolidated financial statements and related notes as of and for the fiscal years ended March 31, 2014 and 2015 and for the nine months ended December 31, 2014 and 2015, included elsewhere in this prospectus have been prepared in accordance with GAAP. References to a particular fiscal year are to our fiscal year ended March 31 of that year.
Overview
Our mission is to be the lowest-cost power producer in the world. We sell solar power in India on long term fixed price contracts to our customers, at prices which in many cases are at or below prevailing alternatives for our customers. We are also developing micro-grid applications for the highly fragmented and underserved electricity market in India.
We generate revenue from a mix of leading government utilities such as NTPC Vidyut Vyapar Nigam Limited, a subsidiary of the NTPC Limited, and the Solar Energy Corporation of India as well as commercial entities such as Torrent Power Limited and DLF Limited. We typically enter into 25-year power purchase agreements, or PPAs, with these customers who pay a fixed rate for electricity generated by our solar power plants. Our financial strategy is to build our solar assets with efficient cost of capital. Because we have our own engineering, procurement and construction, or EPC, as well as operations and maintenance, or O&M, capabilities, we retain the profit margins associated with those services that other project developers normally pay to third party providers. Through value engineering, operational performance monitoring and efficient financial strategy, we are able to deliver cost-effective energy to our customers.
We recognize revenue from solar energy sold to our customers on a per kilowatt hour basis based on the energy actually supplied by our solar power plant. The procurement of solar power by the utilities in the market is primarily driven by the renewable energy purchase obligation imposed on them by the Indian government. Most Indian state and central government electricity regulators establish the rate that utilities pay to buy power in their respective jurisdictions, which we call the benchmark tariff. As a result, the price a customer pays to buy solar energy from us varies depending on the jurisdiction in which the customer is located. The price at which we sell solar energy also depends on our bidding strategy, as most auctions award bids starting from the lowest bidder until the total capacity is awarded. For our commercial PPAs, we sell solar energy at mutually negotiated rates that are lower than the commercial electricity rates charged by the utilities in the markets we serve, which is consistent with our strategy to price our energy slightly lower than the commercial rates. As a result, the price that a commercial customer pays to buy solar energy from us depends on the state in which such customer is located and the prevailing local commercial tariff.
We recognize revenue on a monthly basis from the solar energy kilowatt hours sold to our customers post the installation of the system and approval of the energy grid interconnect connections. The energy output performance of our plants is dependent in part on the amount of sunlight. As a result, our revenue in the past has been impacted by shorter daylight hours in winters. Typically, our revenue from operational solar power plants is lowest in the third quarter and highest in the first quarter of any given fiscal year which ends on March 31.
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A significant portion of the cost of our solar power plants consists of solar photovoltaic panels, inverters and other equipment. Other less significant costs of our solar power plants include land or leasehold land costs, capitalizable financing costs and installation costs. Our cost of operations primarily consists of expenses pertaining to operations and maintenance of our solar power plants. These expenses include payroll and related costs for plant maintenance staff, plant maintenance, insurance and, if applicable, lease costs.
Under GAAP, we depreciate the capital cost of solar power plants over the estimated useful life of 25 years.
We typically fund our projects through a mix of project finance and sponsor equity. We generally raise long term debt financing of approximately 75% of project costs. The remaining 25% of project costs required is met through a mix of cash flow generated from our business and equity proceeds. Our project financing agreements typically restrict the ability of our project subsidiaries to distribute funds to us unless specific financial thresholds are met on specified dates. Some of our project finance borrowings are denominated in U.S. dollars and therefore foreign currency exchange rate fluctuations can adversely impact our profitability. Some of our borrowings have variable interest rates and changes in such rates may lead to an adverse effect on our overall cost of capital.
From time to time we have raised funds through issuance of compulsorily convertible debentures and Series A through H compulsorily convertible preferred shares. We classify our outstanding compulsorily convertible debentures and Series E and Series G compulsorily convertible preferred shares as a liability on our consolidated balance sheet. Series A to D and Series F and Series H compulsorily convertible preferred shares are classified as temporary equity on the consolidated balance sheet. Prior to the closing of this offering, the compulsorily convertible debentures and compulsorily convertible preferred shares will convert into equity shares. As a result of these conversions, we will record a material non-cash adjustment to equity shares and additional paid-in-capital on our consolidated balance sheet.
Convenience Translation
Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Further, AZIs functional and reporting currency is the Indian rupee. Solely for the convenience of the reader, we have translated the financial information as of and for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 into U.S. dollars. The exchange rate used for this translation is Rs. 66.19 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. dollar currencies as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2015, which is the date of our last reported financial statements.
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Power Purchase Agreements
The following chart shows the commercial operation date, capacity, tariff, offtaker and duration of the PPA for our projects as of January 31, 2016.
Operational | ||||||||||||||
Project Names |
Commercial
Operation Date(1) |
Capacity (MW) |
Tariff
(Rs/kWh) |
Offtaker |
Duration
of PPA in Years |
|||||||||
Punjab 1 |
Q4 2009 | 2 | 17.91 | NTPC Vidyut Vyapar Nigam | 25 | |||||||||
Punjab 2.1 |
Q3 2014 | 15 | 7.67 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 2.2 |
Q4 2014 | 15 | 7.97 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 2.3 |
Q4 2014 | 4 | 8.28 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 3.1 |
Q1 2016 | 24 | 7.19 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 3.2 |
Q1 2016 | 4 | 7.33 | Punjab State Power Corporation Limited | 25 | |||||||||
Gujarat 1.1 |
Q2 2011 | 5 | 15.00(3) | Gujarat Urja Vikas Nigam Limited | 25 | |||||||||
Gujarat 1.2 |
Q4 2011 | 5 | 15.00(3) | Gujarat Urja Vikas Nigam Limited | 25 | |||||||||
Rajasthan 1 |
Q4 2011 | 5 | 11.94 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
Rajasthan 2.1 |
Q1 2013 | 20 | 8.21 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
Rajasthan 2.2 |
Q1 2013 | 15 | 8.21 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
Rajasthan 3.1 |
Q2 2015 | 20 | 5.45 |
Solar Energy Corporation of India |
25 | |||||||||
Rajasthan 3.2 |
Q2 2015 | 40 | 5.45 |
Solar Energy Corporation of India |
25 | |||||||||
Rajasthan 3.3 |
Q2 2015 | 40 | 5.45 |
Solar Energy Corporation of India |
25 | |||||||||
Rajasthan 4 |
Q4 2015 | 5 | 5.45 | Solar Energy Corporation of India | 25 | |||||||||
Karnataka 1 |
Q1 2015 | 10 | 7.47 |
Bangalore Electricity Supply Company Limited |
25 | |||||||||
Uttar Pradesh 1 |
Q1 2015 | 10 | 8.99 |
Uttar Pradesh Power Corporation Limited |
12 | |||||||||
Chhattisgarh 1.1 |
Q2 2015 | 10 | 6.44 |
Chhattisgarh State Power Distribution Company Limited |
25 | |||||||||
Chhattisgarh 1.2 |
Q2 2015 | 10 | 6.45 |
Chhattisgarh State Power Distribution Company Limited |
25 | |||||||||
Chhattisgarh 1.3 |
Q3 2015 | 10 | 6.46 |
Chhattisgarh State Power Distribution Company Limited |
25 | |||||||||
Delhi 1.1 |
Q4 2015 | 1 | 5.43 | Solar Energy Corporation of India | 25 | |||||||||
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|
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Total Capacity |
270 | |||||||||||||
Under Construction | ||||||||||||||
Karnataka 2 |
Q1 2015 | 10 | 6.66 | Bangalore Electricity Supply Company Limited | 25 | |||||||||
Karnataka 3.1 |
Q3 2016 | 50 | 6.89 | Chamundeshwari Electricity Supply Corporation Limited | 25 | |||||||||
Karnataka 3.2 |
Q3 2016 | 40 | 6.93 | Hubli Electricity Supply Corporation Limited | 25 |
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Notes:
(1) | Refers to the applicable quarter of the calendar year. There can be no assurance that our projects under construction and our committed projects will be completed on time or at all. See Risk Factors Our construction activities may be subject to cost overruns or delays. |
(2) | Hanwha Q Cells Korea holds a non-controlling interest against its investment of Rs. 316.9 million. |
(3) | Current tariff, subject to escalation, as disclosed under BusinessPortfolio of Solar Energy ProjectsOperational Projects. |
(4) | PPAs for 2.246MW signed, 1.46MW of the project has commenced operations. |
(5) | 0.0529MW of the project has commenced operations. |
Our PPAs typically require certain conditions precedent, including, among others, that we have obtained all necessary consents and permits, financing arrangements have been made and an agreement has been entered into to provide for the transmission of power. Furthermore, the PPAs contain customary termination provisions and negative and affirmative covenants, including the provision of performance bank guarantees and minimum guarantees of power to be sold and restrictions on changing the controlling shareholder of the project subsidiaries.
Corporate Structure
Prior to the formation of Azure Power Global Limited and the reorganization described below, our operations were entirely conducted through AZI and its subsidiaries. AZI is a company organized under the laws of India. Azure Power Global Limited was formed to enable the consummation of the transactions described below and this offering.
In relation to the shareholders agreement entered into on July 22, 2015 among us, the non-founder investors in AZI and the founders, referred to as the APGL Shareholders Agreement, we purchased from the non-founder investors in AZI the equity shares and convertible securities in the form of compulsorily convertible debentures and compulsorily convertible preferred shares held by them in AZI for an equivalent number of equity shares, compulsorily convertible debentures and compulsorily convertible preferred shares in Azure Power Global Limited on substantially similar terms as those formerly held in AZI, which we referred to as the reorganization.
Prior to the reorganization, the non-founder investors had an 86% ownership interest, on an as converted basis (excluding the compulsorily convertible debentures and Series E compulsorily convertible preferred shares which convert into a variable and currently indeterminable number of equity shares), in AZI with the balance held by the AZI founders. Subsequent to the reorganization, we held an 86% interest in AZI, on an as converted basis, with the balance remaining with the AZI founders. As a result of the reorganization, the non-founder investors also held an 86% ownership interest in us, on an as converted basis, with the balance held by the founders. As of the date hereof, we hold approximately 94% of AZI on an as converted basis.
On July 22, 2015, we, AZI and the founders entered into another shareholders agreement, referred to as the AZI Shareholders Agreement, which provides that it is the intention of all parties to the AZI Shareholders Agreement to eventually make AZI a wholly owned subsidiary of ours. As such, pursuant to the AZI Shareholders Agreement, we have an indefinite option requiring the AZI founders to sell their shareholding in AZI to us at the minimum applicable price as per Indian law, which is expected to be close to the fair value of the shares. In addition, the AZI Shareholders Agreement prohibits a transfer of AZI equity shares held by the founders without our consent. Furthermore, the founders and the non-founder investors entered into a Sponsor Lock-in Agreement, referred to as the Lock-in Agreement, whereby the APGL founders cannot dispose of their shares in Azure Power Global Limited to the extent of value of their shareholding in AZI until the occurrence of a termination event, as defined, including if our IPO is not completed by December 31, 2015. Any excess return earned by the founders upon disposal of their shareholding above the face value (Rs. 10, or US$0.15, per equity share) plus taxes incurred on transfer of such shares is to be distributed among the founders and non-founders pro
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rata based on their as converted shareholding in us, provided a termination event has not occurred. The non-founder investors and founders have agreed in principle to extend the lock in period, including the period for sharing the excess returns, past the completion of our initial public offering.
The combined effect of the APGL Shareholders Agreement, the AZI Shareholders Agreement and the Lock-In Agreement replicated the founders and the non-founder investors interests in AZI in Azure Power Global Limited on a substantially cash neutral basis and without any gain/loss by one party at the expense of another party. To fairly reflect the economic substance of the agreements and the reorganization, we have prepared the consolidated and condensed consolidated financial statements as though we had been combined with AZI since the earliest period presented, using the pooling of interests method of accounting with the assets and liabilities of the entities recorded at their historical carrying values. Similarly, no value has been attributed to the non-controlling interest still held by the AZI founders in AZI.
Dividends
As we are a holding company, we will have to rely on dividends paid to us by our subsidiaries (in particular, our key operating subsidiary in India, AZI) for our cash requirements, including funds to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. As of the date of this prospectus, AZI has not paid any cash dividends on its equity shares and does not intend to pay dividends to its equity shareholders, including Azure Power Global Limited, in the foreseeable future. See Dividends and Dividend Policy for more information.
Key Metrics
We regularly review a number of specific metrics, including the following key operating and financial metrics, to evaluate our business performance, identify trends affecting our business and make strategic decisions.
Key metrics |
Unit of measurement | FY 2014 | FY 2015 |
Nine months ended
December 31, 2014 |
Nine months ended
December 31, 2015 |
|||||||||||||
Electricity generation(1) |
kWh in millions | 96.9 | 128.4 | 86.0 | 253.9 | |||||||||||||
Plant load factor |
% | 20.6 | 18.7 | 19.2 | 17.4 | |||||||||||||
Revenue(2) |
Rs. in millions | 881.3 | 1,124.1 | 767.3 | 1,858.9 | |||||||||||||
Cost per MW operating |
Rs. in millions | 78.2 | 60.5 | 58.4 | 60.2 | |||||||||||||
MW operating |
MW | 55.2 | 110.2 | 90.5 | 248.5 | |||||||||||||
MW committed |
MW | 154.5 | 374.2 | 210.0 | 555.7 | |||||||||||||
MW operating and committed |
MW | 209.7 | 484.4 | 300.5 | 804.2 |
(1) | Electricity generation represents the actual amount of power generated by our solar power plants over the reporting period and is the product of plant load factor during the reporting period and the average megawatts operating. |
(2) | Revenue consists of revenue from the sale of power. |
Factors that most significantly directly or indirectly affect our overall growth and results of operations, or that cause our historical financial information not to be indicative of future operating results or financial condition, include the Indian governments targets for solar capacity addition and the more gradual decline in solar module prices. The Indian government recently increased its target for solar capacity from 20GW by 2022 to 100GW by 2022. While this trend may lead to us winning more megawatts per year than in prior years, it will also require us to raise additional funding sources if we are to grow in line with these trends.
As for the cost of our system components, we witnessed a steep decline of solar module prices of approximately 75% from 2010 to 2015. Although the pace of this decline has been slowing recently, we expect this general trend of slowly declining solar module prices to continue through fiscal year 2016.
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Operating Metrics
Megawatts Operating and Megawatts Committed
We measure the rated capacity of our plants in megawatts. Rated capacity is the expected maximum output that a solar power plant can produce without exceeding its design limits. We believe that tracking the growth in aggregate megawatt rated capacity is a measure of the growth rate of our business.
Megawatts Operating represents the aggregate cumulative megawatt rated capacity of solar power plants that are commissioned and operational as of the reporting date.
Megawatts Committed represents the aggregate megawatt rated capacity of solar power plants pursuant to customer PPAs signed or allotted but not commissioned and operational as of the reporting date.
The following table represents the megawatts operating and megawatts committed as of the end of the respective periods presented:
As of March 31, | As of December 31, | |||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||
Megawatts Operating |
55.2 | 110.2 | 90.5 | 248.5 | ||||||||||||
Megawatts Committed |
154.5 | 374.2 | 210.0 | 555.7 | ||||||||||||
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Megawatts Operating and Committed |
209.7 | 484.4 | 300.5 | 804.2 | ||||||||||||
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We are targeting having 520MW operating by December 31, 2016. Our longer term goals are to achieve 1GW committed or operating by December 31, 2017 and 5GW by December 31, 2020. Our ability to achieve these goals will depend on, among other things, our ability to acquire the required land for the new capacity (on lease or direct purchase), raising adequate project financing and working capital, the growth of the Indian power market in line with current government targets, our ability to maintain our market share of Indias installed capacity as competition increases, the need to further strengthen our operations team to execute the increased capacity, and the need to further strengthen our systems and processes to manage the ensuing growth opportunities, as well as the other risks and challenges discussed under the caption Risk Factors.
Plant Load Factor
The plant load factor is the ratio of the actual output of all our solar power plants over the reporting period to its potential output if it were possible for it to operate indefinitely at full rated capacity. The plant load factor is not the same as the availability factor. Our solar power plants have high availability, that is, when the sun is shining our plants are almost always able to produce electricity. The variability in our plant load factor is a result of seasonality, cloud covers, the daily rotation of the earth, equipment efficiency losses, breakdown of our transmission system and grid availability.
We track plant load factor as a measure of the performance of our power plants. It indicates effective utilization of resources and also validates our value engineering and operation research. Higher plant load factor at a plant indicates increased electricity generation. Monitoring plant load factor on real time allows us to respond rapidly to potential generation anomalies. Generally, under the terms of our PPAs, we guarantee a plant load factor of 12%. Plant load factor was 18.7% for fiscal year 2015 compared with 20.6% for fiscal year 2014, primarily due to the commencement of operations of certain projects in the northern part of India, for which plant load factors tend to be seasonal, with relatively low plant load factors during the winter months. Plant load factor was 17.4% for nine months ended December 31, 2015 compared with 19.2% for nine months ended December 31, 2014, primarily due to the commencement of operations of certain projects in the northern part of India, for which plant load factors tend to be seasonal, with relatively low plant load factors during the winter months.
Fiscal Year Ended
March 31, |
Nine Months Ended
December 31, |
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2014 | 2015 | 2014 | 2015 | |||||||||||||
Plant Load Factor (in %) |
20.6 | 18.7 | 19.2 | 17.4 |
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Electricity Generation
Electricity generation represents the actual amount of power generated by our solar power plants over the reporting period and is the product of reporting period plant load factor and the average megawatts operating. This is a measure of the periodic performance of our solar power plants.
Fiscal Year Ended
March 31, |
Nine Months Ended
December 31, |
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2014 | 2015 | 2014 | 2015 | |||||||||||||
Electricity Generation (kilowatt hours in millions) |
97 | 128 | 86 | 254 |
Financial Metrics
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure. We present Adjusted EBITDA as a supplemental measure of our performance. This measurement is not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We define Adjusted EBITDA as net loss (income) plus (a) income tax expense, (b) interest expense, net, (c) depreciation and amortization and (d) loss (income) on foreign currency exchange. We believe Adjusted EBITDA is useful to investors in evaluating our operating performance because:
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securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities; and |
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it is used by our management for internal reporting and planning purposes, including aspects of our consolidated operating budget and capital expenditures. |
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
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it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments or foreign exchange gain/loss; |
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it does not reflect changes in, or cash requirements for, working capital; |
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it does not reflect significant interest expense or the cash requirements necessary to service interest or principal payments on our outstanding debt; it does not reflect payments made or future requirements for income taxes; and |
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although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or paid in the future and Adjusted EBITDA does not reflect cash requirements for such replacements or payments. |
Investors are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis.
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The following table presents a reconciliation of net loss to Adjusted EBITDA:
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$ | Rs. | Rs. | US$ | |||||||||||||||||||
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Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | (884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||||||||
Income tax expense/(benefit) |
15,847 | 253,112 | 3,824 | 205,804 | 89,427 | 1,351 | ||||||||||||||||||
Interest expense, net |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | 218,016 | 495,647 | 7,488 | ||||||||||||||||||
Loss on foreign currency exchange |
580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | ||||||||||||||||||
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Adjusted EBITDA |
593,554 | 618,370 | 9,343 | 471,449 | 1,250,075 | 18,886 | ||||||||||||||||||
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Project Cost per Megawatt Operating
Project cost per megawatt operating consists of solar photovoltaic panels, inverters, balance of plant equipment, land or leasehold land, capitalizable financing, and installation costs incurred for operating one megawatt of new solar power plant capacity during the reporting period. It is an indicator of our strong engineering, procurement and construction capabilities, market cost of material and our ability to procure such material at competitive prices. A reduction in project cost per megawatt helps reduce the cost of power and thereby improves our ability to win new projects. The project cost per megawatt operating for the fiscal years ended March 31, 2014 and 2015 and the nine months ended December 31, 2014 and 2015 was Rs. 78.2 million and Rs. 60.5 million (US$0.91 million) and Rs. 58.4 (US$0.9)and Rs. 60.2 million (US$0.9 million) respectively. The decrease in cost was minimal primarily on account of domestic content projects (Rajasthan 3.1, 3.2 and 4), which are more costly to build, becoming commissioned during the year. Further, viability gap funding, or VGF, attributable to Rajasthan 3.1, 3.2, 3.3 and 4 projects (Rs. 1,924 million in total) is amortized as power sale revenue over the project life of 25 years. In addition, we have purchased more freehold land for projects during the nine months ended December 31, 2015 and have installed increased DC capacity in order to increase our yield as compared to projects in fiscal year ended March 31, 2015. While we expect project cost to decline during fiscal year 2017, we expect that the decline in project cost will be significantly less than in prior years.
Nominal Contracted Payments
Our PPAs create long-term recurring customer payments. Nominal contracted payments equal the sum of the estimated payments that the customer is likely to make, subject to discounts or rebates, over the remaining term of the PPAs. When calculating nominal contracted payments, we include those PPAs for projects that are operating or committed. To calculate the nominal contracted payments, we multiply the contract price per kilowatt hour as per the respective PPA by the estimated annual energy output for the balance life of the PPA period. In estimating the nominal contracted payments, we multiply the PPA contract price per kilowatt hour by the estimated annual energy output for all solar projects committed and operating as of the reporting date. The estimated annual energy output of a project is calculated using its current operating plant load factor (for operating projects) or budgeted plant load factor (for committed projects only), rated capacity of the project and the annual estimated decrease in rated capability of the solar panels, which is based on the technology used for the project.
If we were to receive government grants under any PPA, such grants would be included as nominal contracted payments in the period when received. We account for VGF as income-type government grant. The proceeds received from VGF grants upon fulfillment of certain conditions are initially recorded as deferred revenue. This deferred VGF revenue is recognized as sale of power in proportion to (x) the actual sale of solar energy kilowatts during the period to (y) the total estimated sale of solar energy kilowatts during the tenure of the
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applicable PPA (as described in Note 2(r) to our consolidated financial statements) pursuant to our revenue recognition policy.
Nominal contracted payments is a forward-looking number, and we use judgment in developing the assumptions used to calculate it. Those assumptions may not prove to be accurate over time. Underperformance of the solar power plants, payment defaults by our customers or other factors described under the heading Risk Factors could cause our actual results to differ materially from our calculation of nominal contracted payments.
The following table sets forth, with respect to our PPAs, the aggregate nominal contracted payments as of the reporting dates. These nominal contracted payments have not been discounted to arrive at the present value.
As of March 31, | As of December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$ | Rs. | Rs. | US$ | |||||||||||||||||||
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Nominal contracted payments |
61,883,812 | 124,714,183 | 1,884,185 | 71,431,271 | 206,588,831 | 3,121,149 |
Nominal contracted payments increased from March 31, 2015 to December 31, 2015 as a result of entering into additional PPAs. Over time, we have seen a trend towards a decline in the Central Electricity Regulatory Commission benchmark tariff for solar power procurement. For fiscal year 2011, the Central Electricity Regulatory Commission benchmark tariff for solar power procurement was Rs. 17.91 per kilowatt hour. It was reduced to Rs. 10.39 per kilowatt hour for fiscal year 2013, which was further reduced to Rs. 7.72 per kilowatt hour for fiscal year 2015. The overall trend of solar power tariffs is that the tariffs are declining in line with the solar module prices.
Portfolio Run-Rate
Portfolio run-rate equals our annualized payments from customers extrapolated based on the operating and committed capacity as of the reporting date. In estimating the portfolio run-rate, we multiply the PPA contract price per kilowatt hour by the estimated annual energy output for all operating and committed solar projects as of the reporting date. The estimated annual energy output of a project is calculated using its current operating plant load factor (for operating projects) or budgeted plant load factor (for committed projects only) and rated capacity of the project.
Portfolio run-rate is a forward-looking number, and we use judgment in developing the assumptions used to calculate it. Those assumptions may not prove to be accurate over time. Underperformance of the solar power plants or other factors described under the heading Risk Factors could cause our actual results to differ materially from our calculation of portfolio run-rate.
The following table sets forth, with respect to our PPAs, the aggregate portfolio run-rate as of the reporting dates. The portfolio run-rate has not been discounted to arrive at the present value.
As of March 31, | As of December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$ | Rs. | Rs. | US$ | |||||||||||||||||||
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Portfolio Run-Rate |
2,403,776 | 5,414,348 | 81,800 | 3,322,615 | 9,208,299 | 139,119 |
Portfolio run-rate increased from March 31, 2015 to December 31, 2015 as a result of the increase in operational and committed capacity during the period.
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Components of Results of Operations
Operating Revenue
Operating revenue consists of solar energy sold to customers under long term PPAs, which generally have a term of 25 years. We have one customer for each solar power plant. Our customers are power distribution companies and to a lesser extent commercial enterprises.
We recognize revenue on a monthly basis based on the solar energy kilowatts actually supplied to our customers multiplied by the rate per kilowatt hour agreed to in the respective PPA. The solar energy kilowatts hours supplied during a month are validated by the customer prior to our billing and recognition of revenue.
Where PPAs include scheduled price changes, revenue is recognized by applying the average rate to the energy output estimated over the term of the PPA. We estimate the total kilowatt hour units expected to be generated annually during the tenure of PPA using budgeted plant load factors, rated capacity of the project and annual estimated decrease in rated capability of solar panels. The contractual rates are applied to this annual estimate to determine the total estimated revenue over the term of the PPA. We then use the total estimated revenue and the total estimated kilowatt hours to compute the average rate used to record revenue on the actual energy output supplied. We compare the actual energy supplied to the estimate of the energy expected to be generated over the remaining term of the PPA on a periodic basis, but at least annually. Based on this evaluation, we reassess the energy output estimated over the remaining term of the PPA and adjust the revenue recognized and deferred to date. Through December 31, 2015, the adjustments have not been significant. The difference between the actual billing and revenue recognized is recorded as deferred revenue.
We recognize revenue when persuasive evidence of an arrangement exists, the fee is fixed or determinable, the electricity is delivered and collectability is reasonably assured. Revenue from sale of power is recorded net of discounts which to date have not been significant.
Cost of Operations (Exclusive of Depreciation and Amortization)
Our cost of operations primarily consists of expenses pertaining to operations and maintenance of our solar power plants. These expenses include payroll and related costs for maintenance staff, plant maintenance, insurance, and, if applicable, lease costs.
General and Administrative Expenses
Our general and administrative expenses include payroll and related costs for corporate, finance and other support staff, including bonus and share based compensation expense, professional fees and other corporate expenses. We anticipate that we will incur additional general and administrative costs, including headcount and expansion related costs, to support the growth in our business as well as additional costs of being a public reporting company.
Depreciation and Amortization
Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of our solar power plants and other assets. Leasehold improvements related to solar power plants are amortized over the shorter of the lease term or the underlying period of the PPA for that particular solar power plant. Leasehold improvements related to office facilities are amortized over the shorter of the lease period or the estimated useful life. Freehold land is not depreciated. Construction in progress is not depreciated until such projects are commissioned.
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Interest Expense, Net
Interest expense, net consists of interest incurred on term loans for projects under our fixed and variable rate financing arrangements and compulsorily convertible debentures. It also includes the deemed interest expense which is payable in the form of a guaranteed return on the compulsorily convertible debentures and the Series E and Series G compulsorily convertible preferred shares, which is classified as a liability. Interest expense also includes bank fees and other borrowing costs, which are typically amortized over the life of the loan using the effective interest rate method. Interest expense is presented net of capitalized financing costs and interest income earned from bank deposits. Interest incurred in connection with a project that has been commissioned is expensed while interest incurred prior to commissioning is capitalized.
Loss on Foreign Currency Exchange
We are exposed to movements in currency exchange rates, particularly to changes in exchange rates between U.S. dollars and Indian rupees. While our functional currency is the U.S. dollar, the functional currency of AZI is Indian rupees and a portion of AZIs borrowings from financial institutions are denominated in U.S. dollars. Foreign exchange loss includes the unrealized and realized loss from foreign currency fluctuations on our non-functional currency denominated borrowings.
We also enter into foreign currency option contracts to mitigate and manage the risk of changes in foreign exchange rates on our borrowings denominated in currencies other than our functional currency. These hedges do not qualify as cash flow hedges under Accounting Standards Codification, or ASC, Topic 815, Derivatives and Hedging. Changes in the fair value of these option contracts are recognized in the consolidated statements of operations and are included in loss on foreign currency exchange.
Income Tax Expense
Our income tax expense consists of current and deferred income tax as per applicable jurisdictions in Mauritius, India and the United States. Income tax for our current and prior periods is measured at the amount expected to be recovered from or paid to taxation authorities based on our taxable income or loss for that period.
Deferred income taxes and changes in related valuation allowance, if any, reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Internal Control over Financial Reporting
As a company with less than US$1.0 billion in revenue for our last fiscal year, we qualify as an emerging growth company pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth companys internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We may adopt new or revised accounting standards on the relevant dates on which adoption of such standard is required. However, we are choosing to opt in to such extended transition period election under Section 107(b) of the JOBS Act. As a result of such election, our financial statements may not be comparable to the financial statements of other public companies.
Prior to this offering, we have been a private company preparing our financial statements in accordance with Indian accounting standards and are reporting under GAAP for the first time. We have limited accounting personnel, other resources and tools with adequate GAAP and SEC reporting knowledge with which to address
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our internal controls and procedures over financial reporting. In the course of the preparation of our consolidated financial statements as of and for each of the two years ended March 31, 2015, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting. As defined in the Commission Guidance Regarding Managements Report on Internal Control Over Financial Reporting under Section 13(a) or 15(d) of the Securities Exchange Act of 1934, Release Nos. 33-8810; 34-55929; FR 77, 6/27/2007, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our companys annual or interim financial statements will not be prevented or detected on a timely basis.
The material weakness identified is a deficiency in our financial statement closing process resulting from the lack of sufficient financial reporting and accounting personnel with appropriate knowledge of GAAP and SEC reporting requirements to properly address complex GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfill GAAP and SEC financial reporting requirements.
To address the material weakness identified, we have taken and are planning to take a number of measures, including (i) hiring additional accounting personnel with experience in GAAP and SEC reporting requirements; (ii) providing regular training on an ongoing basis to our accounting personnel that covers a broad range of accounting and financial reporting topics; (iii) developing and applying a comprehensive manual with detailed guidance on accounting policies and procedures as well as procedures for maintenance and retention of accounting and financial records; and (iv) forming an independent audit committee which consists of independent directors, one of them being a financial expert to review our GAAP financial statements and key accounting positions taken until we have sufficient knowledgeable personnel on staff. We have already appointed an independent director who is a financial expert with extensive experience in GAAP and SEC reporting matters. However, the implementation of these measures may not fully remediate the material weakness in our internal control over financial reporting. We are not able to estimate with reasonable certainty the costs that we will need to incur to implement these and other measures designed to improve our internal control over financial reporting. See Risk FactorsRisks Related to Our Business and IndustryIn the course of preparing our consolidated financial statements, we have identified a material weakness and other control deficiencies in our internal control over financial reporting, which, as of the date of this prospectus, have not been remediated. If we fail to achieve an effective system of internal control over financial reporting, we may be unable to accurately report our financial results and investor confidence in our company and the market price of the equity shares may be adversely affected.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. We have identified certain accounting policies that we believe are the most critical to the presentation of our consolidated financial information over a period of time. These accounting policies may require our management to take decisions on subjective and/or complex matters relating to reported amounts of assets, liabilities, revenue, costs, expenses and related disclosures. These would further lead us to estimate the effect of matters that may inherently be uncertain.
The judgment on such estimates and underlying assumptions is based on our experience, historical trends, understanding of the business, industry and various other factors that we believe are reasonable under the circumstances. These form the basis of our judgment on matters that may not be apparent from other available sources of information. In many instances changes in the accounting estimates are likely to occur from period-to-period. Actual results may differ from the estimates. The future financial statement presentation, financial condition, results of operations and cash flows may be affected to the extent that the actual results differ materially from our estimates.
Our significant accounting policies are summarized in Note 2 Summary of Significant Accounting Policies to our consolidated financial statements included elsewhere in this prospectus. Our various critical accounting policies and estimates are discussed in the following paragraphs.
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Income Taxes
Income tax expense consists of (i) current income tax expense arising from income from operations (ii) deferred income tax expense/(benefit) arising from temporary differences and (iii) income tax expense/(benefits) as a result of certain intercompany transactions.
We use the asset and liability method in accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on the difference between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The tax rates on reversal of temporary differences might be different from the tax rates used for creation of the respective deferred tax assets/liabilities.
As of March 31, 2014 and 2015, we had gross deferred tax assets of Rs. 140.8 million and Rs. 77.8 million (US$1.2 million), respectively, and gross deferred tax liabilities of Rs. 110.3 million and Rs. 169.5 million (US$2.6 million), respectively. As of December 31, 2015, we had gross deferred tax assets of Rs. 683.1 million (US$10.3 million), and gross deferred tax liabilities of Rs. 811.9 million (US$12.3 million).
We apply a two-step approach to recognize and measure uncertainty in income taxes in accordance with the Financial Accounting Standards Board, or FASB, Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes an interpretation of ASC Topic 740. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. We re-evaluate these uncertain tax positions on an annual basis. This evaluation is based on factors including changes in facts or circumstances, changes in tax law and effectively settled issues under tax-audit. Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision in the relevant period. As of March 31, 2014 and 2015 and as of December 31, 2015, we did not have any material uncertain tax positions.
We establish valuation allowances against our deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized.
A portion of our Indian operations qualifies for tax holiday related to their operating income attributable to undertakings, as defined, in operating solar power plants under section 80-IA of the Indian Income Tax Act, 1961. This holiday is available for a period of ten consecutive years out of fifteen years beginning from the year in which the undertaking first generates power (referred to as the Tax Holiday period). We assess the election of the Tax Holiday period on an annual basis for each of our undertakings. We believe these undertakings will generate higher taxable profits due to lower interest cost as debt balances are paid down in the later years of operations and therefore we plan to defer the Tax Holiday election to later years in order to maximize the benefits. As of December 31, 2015, we have not started claiming any tax holiday benefits for any of our undertakings. Deferred tax assets are recognized to the extent probable of realization outside the anticipated Tax Holiday period. For example, if we choose years six through 15 as the tax holiday period, we recognize deferred tax assets only to the extent that they will be realized either in years one through five or from year 16 onwards. As a result, all temporary differences do not result in creation of a deferred tax asset or liability.
AZI and a subsidiary provide EPC services to other group subsidiaries and as a result incur income taxes on profits from the services provided. The services provided to the group subsidiaries are in the nature of capitalizable costs and are therefore capitalized as part of property, plant and equipment in the standalone financial statements of such subsidiaries. However, these capitalized costs are eliminated for the purposes of the consolidated financial statements. The costs capitalized in the standalone financial statements are however
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eligible for income tax deductions in the tax records of the respective group subsidiaries. We recognize a portion of income taxes incurred by AZI and the subsidiary providing such services as prepaid income taxes to the extent we will be able to realize the benefit derived from tax deductions availed by the other subsidiaries. We assess that the probability of realizing the benefit on an annual basis and its recognition is limited to the extent probable of realization outside of the anticipated Tax Holiday period. Our estimate is that such benefit is limited to approximately 30% to 55% of the tax expense incurred by AZI and the subsidiary. Prepaid income taxes are expensed in the statement of operations in the period the benefit is actually realized by the other group subsidiaries. As a result, while all the profits on inter-company transactions are eliminated during consolidation, it does not result in complete reversal of tax expense on such inter-company transactions. Accordingly, while we have never been profitable, we report income tax expenses that fluctuate over the period.
Share Based Compensation
In connection with this offering, the stock options granted to the employees have been cancelled at the AZI level and reissued at the Azure Power Global Limited level. For cancellation of the AZI plan, no additional considerations were paid or received from employees. There were no change in the Azure Power Global Limited plan of the employees in the plan, the number of options granted to the employees or the exercise price. The options under the Azure Power Global Limited plan were considered as immediate vesting, except for four of the employees.
We account for share options granted to our employees in accordance with ASC Topic 718 Stock Compensation . Under the fair value recognition provision of such guidance, compensation for share options granted is measured at the grant date, based on the fair value of the options, and is recognized as expense over the vesting period of the option.
Share based compensation expense is recorded net of estimated forfeitures in our consolidated statement of operations under general and administrative expenses and is recorded for only those share options that we expect to vest. These share options have been granted to the employees who are in the corporate or finance department and to other support staffs. We estimate the forfeiture rate based on historical forfeitures of share options and adjust the rate to reflect changes in facts and circumstances. We revise our estimated forfeiture rate if actual forfeitures differ from our initial estimates.
Determining the fair value of share options requires significant judgment. We estimated the fair value of our share options using the Black-Scholes valuation model for awards with service vesting conditions and the Lattice valuation model for awards vesting based on achievement of market conditions. These models require inputs such as the fair value of our equity shares, risk-free interest rate, expected dividend yield, expected term and expected volatility and we have applied these inputs in determining the fair value of the share options as follows:
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Fair value of our equity shares as our equity shares are not publicly traded, we have valued our business on the date of each option grant. |
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Risk free interest rate the risk free interest rate is based on the yield on a treasury bond issued by the Indian government on the grant date with the tenor matching the remaining term of the share options. |
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Expected dividend yield we have never declared or paid any cash dividends on our equity shares and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero. |
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Expected term the expected term was estimated based on the average between the vesting period and the plan term. Our share option plan expires on July 20, 2025. |
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Expected volatility as we do not have a trading history for our equity shares, the expected volatility for our equity shares was estimated by taking the average historical price volatility for companies with similar lines of business based on the price fluctuations of their shares over a period equivalent to the |
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expected term of the share options granted. Companies with similar lines of business consist of several public companies similar in size, which are engaged in similar business sectors in India and worldwide. We have considered a three year average to be a reasonable estimate of volatility for the purpose of valuation. The volatility is unlevered and then re-levered to adjust for our capital structure. We intend to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of our own equity share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. |
The following table presents the assumptions used to estimate the fair value of options granted during the periods presented:
Fiscal Year Ended
March 31, |
Nine Months Ended
December 31, |
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2014 | 2015 | 2014 | 2015 | |||||
Expected term (in years) |
2.61-4.70 | 2.09-3.84 | 2.09 | 5.0-6.8 | ||||
Expected volatility |
43.9%-45.6% | 31.2%-42.3% | 42.30% | 37.2%-41.6% | ||||
Risk-free interest rate |
7.51%-7.68% | 7.69%-8.34% | 8.34% | 7.60%-8.08% |
Share based compensation included in general and administrative expenses totaled Rs. 4.4 million and Rs. 7.4 million (US$0.1 million), Rs. 5.3 million and Rs. 49.4 million (US$0.7 million) for the fiscal years ended March 31, 2014 and 2015 and the nine months ended December 31, 2014 and 2015, respectively. As of December 31, 2015, we had Rs. 0.7 million (US$0.01 million) of unrecognized compensation expense which will be recognized over the remaining weighted average vesting period of one year.
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Results of Operations
Azure Power Global Limiteds functional currency is the U.S. dollar and reporting currency is the Indian rupee. Solely for the convenience of the reader, we have translated the financial information for the fiscal year ended March 31, 2015 and the nine months ended December 31, 2015 into U.S. dollars. The rate used for this translation is Rs. 66.19 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. dollar currencies as certified for customs purposes by the Federal Reserve Bank of New York as of December 31, 2015, which is the date of our last reported financial statements. No representation is made that the Indian rupee amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate.
Fiscal Year Ended March 31, | Nine Months Ended December 31, | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Rs. | Rs. | US$ | Rs. | Rs. | US$ | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Consolidated Statement of Operations Data: |
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Operating revenue: |
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Sale of power |
881,345 | 1,124,138 | 16,984 | 767,362 | 1,858,911 | 28,084 | ||||||||||||||||||
Operating costs and expenses: |
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Cost of operations (exclusive of depreciation and amortization shown separately below) |
52,491 | 79,816 | 1,206 | 54,029 | 127,308 | 1,923 | ||||||||||||||||||
General and administrative expenses |
235,300 | 425,952 | 6,435 | 241,884 | 481,528 | 7,275 | ||||||||||||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | 218,016 | 495,647 | 7,488 | ||||||||||||||||||
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Total operating cost and expenses |
540,143 | 828,198 | 12,512 | 513,929 | 1,104,483 | 16,686 | ||||||||||||||||||
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Operating income |
341,202 | 295,940 | 4,472 | 253,433 | 754,428 | 11,398 | ||||||||||||||||||
Other expense: |
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Interest expense, net |
520,219 | 831,790 | 12,567 | 563,928 | 1,389,289 | 20,989 | ||||||||||||||||||
Loss on foreign currency exchange |
580,566 | 299,628 | 4,527 | 368,631 | 337,112 | 5,093 | ||||||||||||||||||
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Total other expenses |
1,100,785 | 1,131,418 | 17,094 | 932,559 | 1,726,401 | 26,082 | ||||||||||||||||||
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Loss before income taxes |
(759,583 | ) | (835,478 | ) | (12,622 | ) | (679,126 | ) | (971,973 | ) | (14,684 | ) | ||||||||||||
Income tax expense |
(15,847 | ) | (253,112 | ) | (3,824 | ) | (205,804 | ) | (89,427 | ) | (1,351 | ) | ||||||||||||
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Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | (884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||||||||
Net loss attributable to non-controlling interest |
(26,935 | ) | (5,595 | ) | (85 | ) | (5,311 | ) | (8,633 | ) | (130 | ) | ||||||||||||
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Net loss attributable to APGL |
(748,495 | ) | (1,082,995 | ) | (16,361 | ) | (879,619 | ) | (1,052,767 | ) | (15,905 | ) | ||||||||||||
Accretion on Mezzanine CCPS |
(366,552 | ) | (755,207 | ) | (11,410 | ) | (494,927 | ) | (1,076,087 | ) | (16,258 | ) | ||||||||||||
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Accretion to redeemable non-controlling interest |
| | | | (18,837 | ) | (285 | ) | ||||||||||||||||
Net loss attributable to APGL equity shareholders |
(1,115,047 | ) | (1,838,202 | ) | (27,771 | ) | (1,374,546 | ) | (2,147,691 | ) | (32,448 | ) | ||||||||||||
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Nine Months Ended December 31, 2015 Compared to Nine Months Ended December 31, 2014
Operating Revenue
Operating revenues during the nine months ended December 31, 2015 increased by Rs. 1,091.5 million, or 142%, to Rs. 1,858.9 million (US$28.1 million) compared to the same period in 2014. The principal reason for
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the increase in revenue during the nine months ended December 31, 2015 was the operation of the Uttar Pradesh 1, Punjab 2 and Karnataka 1 solar power projects, which commenced operations in the fourth quarter of fiscal year 2015 and contributed incremental operating revenue of Rs. 92.0 million, Rs. 216.3 million and Rs. 85.8 million, respectively, and the operation of the Rajasthan 3.1, 3.2, and 3.3 solar power projects and Chhattisgarh 1 project, which commenced operations in the first quarter of fiscal year 2016, and contributed incremental operating revenue of Rs. 112.4 million, Rs. 233.8 million and Rs. 243.1 million and 125.5 million, respectively.
Cost of Operations (Exclusive of Depreciation and Amortization)
Cost of operations during the nine months ended December 31, 2015 increased by Rs. 73.3 million, or 136%, to Rs. 127.3 million (US$1.9 million) compared to the same period in 2014. The increase was primarily due to increase in plant maintenance cost related to newly operational projects by Rs. 66.9 million and an increase in leasehold rent of Rs. 6.4 million primarily resulting from increased leased land in connection with our projects during the nine months ended December 31, 2015.
General and Administrative Expenses
General and administrative expenses during the nine months ended December 31, 2015 increased by Rs. 239.6 million, or 99%, to Rs. 481.5 million (US$7.3 million) compared to the same period in 2014. This was primarily due to increased professional expenses of Rs. 114.9 million, which related to professional fees paid for raising capital and expenses in connection with this offering that have not been deferred, travel and business development expenses for new solar power projects of Rs. 3.5 million, payroll cost of Rs. 92.9 million, which primarily resulted from new hiring and modification of the stock option plan and increased overheads of Rs. 28.4 million which primarily resulted from office rent and related infrastructure costs as the scale of our business has expanded.
Depreciation and Amortization
Depreciation and amortization expenses during the nine months ended December 31, 2015 increased by Rs. 277.6 million, or 127%, to Rs. 495.6 million (US$7.5 million) compared to the same period in 2014. The principal reason for the increase in depreciation was the capitalization of the Punjab 2.1, 2.2 and 2.3 projects, which commenced operation in phases from September 2014 through October 2014 and accounted for additional depreciation of Rs. 38.9 million, Uttar Pradesh 1 and Karnataka 1 projects, which commenced operation in January 2015 and accounted for additional depreciation of Rs. 35.2 million, Rajasthan 3.1, 3.2 and 3.3 solar power projects, which commenced operation in phases from April 2015 through May 2015 and resulted in additional depreciation of Rs. 162.37 million and Chhattisgarh 1.1, 1.2 and 1.3 solar power projects, which commenced operation in phases from May 2015 through August 2015 and resulted in additional depreciation of Rs. 32.8 million.
Interest Expense, Net
Net interest expense during the nine months ended December 31, 2015 increased by Rs. 825.4 million, or 146%, to Rs. 1,389.3 million (US$21.0 million) compared to the same period in 2014.
Interest expense during the nine months ended December 31, 2015 increased by Rs. 900.7 million, or 132%, to Rs. 1,582.5 million (US$23.9 million). Interest expense increased primarily as a result of Rs 733.0 million on borrowings for the Punjab 2, Uttar Pradesh 1 and Karnataka 1 solar power projects operating during the nine months ended December 31, 2015 and Rajasthan 3 and Chhattisgarh 1 solar power project operating in phases starting from April 2015 and Rs. 121.9 million due to the change in the fair value of compulsorily convertible instruments.
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Interest income during the nine months ended December 31, 2015 increased by Rs. 74 or 63%, to Rs. 193.2 million (US$2.9 million) compared to the same period in 2014 primarily as a result of an increase in income on term deposits placed during the period of Rs. 55.2 million and increase in gain on sale of short term investments by Rs. 23.8 million.
Loss on Foreign Currency Exchange
Foreign exchange loss during the nine months ended December 31, 2015 decreased by Rs. 31.5 million to Rs. 337.1 million (US$5.1 million) compared to the same period in 2014.
The closing exchange rate of Indian rupees depreciated against the U.S. dollar from Rs. 63.3 to US$1.00 as of December 31, 2014 to Rs. 66.3 to US$1.00 as of December 31, 2015. This depreciation of the Indian rupee resulted in an increase in unrealized foreign exchange losses of Rs. 25.7 million on our foreign denominated debt and decrease in unrealized foreign exchange gain of Rs. 11.2 million on our foreign currency option contracts. These foreign exchange losses were partially offset by an increase in realized gain of Rs. 40.1 million on our foreign denominated debt and decrease in realized loss of Rs. 28.3 million respectively on our foreign currency option contracts.
Income Tax Expense
Income tax expense decreased during the nine months ended December 31, 2015 by Rs. 116.4 million to Rs. 89.4 million (US$1.4 million), compared to the same period in 2014. Our effective income tax rate for the nine months ended December 31, 2015 was 9.2% as compared to an expense of 30.3% for the same period in 2014. The decrease in income tax expense and the effective tax rate in the nine months ended December 31, 2015 was a result of lower taxable profits generated by AZI in the current period which provides certain engineering, procurement and construction services to its Indian subsidiaries. We pay taxes on taxable profits at the individual entity level, in accordance with the tax rates in the relevant jurisdictions. While at the consolidated level, we have never been profitable, AZI and certain Indian and non-Indian subsidiaries at the individual entity level have generated taxable profits. These taxable profits result from services provided by these entities to other subsidiaries and are taxed at the applicable tax rates in the jurisdiction of the entity providing the services. These inter-company transactions and profits are eliminated during consolidation, while the related income tax expense is not eliminated. Furthermore, a portion of our Indian operations qualifies for a tax holiday related to their operating income attributable to undertakings, as defined, in operating solar power plants under section 80-IA of the Indian Income Tax Act, 1961. This holiday is available for a period of ten consecutive years out of 15 years beginning from the year in which the undertaking first generates power (referred to as the tax holiday period). We anticipate that we will claim the aforesaid deduction in the last ten years out of 15 years beginning with the year in which we generate power and when we have taxable income. Accordingly, our current operations are taxable at the normally applicable tax rates. Due to the tax holiday period, a substantial portion of the temporary differences between the book and tax basis of our assets and liabilities do not have any tax consequences as they are expected to reverse within the tax holiday period.
The change in our income tax expense was largely attributable to a decrease in our domestic deferred tax expense on account of lower taxable profits generated by AZI. During the nine months ended December 31, 2015, we recorded a domestic deferred tax expense of Rs. 58.9 million, whereas for the nine months ended December 31, 2014, we recorded a domestic deferred tax benefit of. Rs. 71.9 million. The primary reason for the change in the level of domestic deferred tax benefit was due to creation of deferred tax asset on account of accelerated depreciation benefit for AZI, which would become realized by way of reduction in the tax outflow in future years.
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Year Ended March 31, 2015 Compared to Year Ended March 31, 2014
Operating Revenue
Operating revenue during the year ended March 31, 2015 increased by Rs. 242.8 million, or 28%, to Rs. 1,124.1 million (US$17.0 million) compared to the same period in 2014. The principal reasons for the increase in operating revenue were the operation of the Punjab 2.1, 2.2 and 2.3 solar power projects, which commenced operations in phases from September 2014 through October 2014 and contributed operating revenue of Rs. 168.1 million in fiscal year 2015; the operation of the Uttar Pradesh 1 and Karnataka 1 solar power projects, which commenced operations in the fourth quarter of fiscal year 2015 and contributed operating revenue of Rs. 22.9 million and Rs. 30.7 million, respectively, in fiscal year 2015; and a Rs. 13.1 million increase in revenue from the Gujarat rooftop solar power project primarily resulting from a full period of operations. We expect revenue will increase in fiscal year 2016 as projects under construction become operational.
Cost of Operations (Exclusive of Depreciation and Amortization)
Cost of operations during the year ended March 31, 2015 increased by Rs. 27.3 million, or 52%, to Rs. 79.8 million (US$1.2 million) compared to the same period in 2014. The increase was primarily due to an increase in leasehold rent of Rs. 19.4 million, which resulted from increased leased land in connection with our projects and increased plant maintenance costs of Rs. 7.4 million resulting from new plants that commenced operations during fiscal years 2014 and 2015 and increased maintenance costs at existing plants.
General and Administrative Expenses
General and administrative expenses during the year ended March 31, 2015 increased by Rs. 190.7 million, or 81%, to Rs. 426.0 million (US$6.4 million) compared to the same period in 2014. This was primarily due to increased professional expenses of Rs. 71.1 million, which primarily related to professional fees paid for raising capital and expenses in connection with this offering, which have not been deferred; travel and business development expenses for new solar power projects of Rs. 57.0 million; payroll cost of Rs. 28.8 million, which primarily resulted from new hiring; and office rent and related infrastructure costs of Rs 33.5 million as the scale of our business has expanded. General and administrative expenses as a percentage of sales increased during the year ended March 31, 2015 compared to the same period in 2014 primarily due to expenses incurred during the year in connection with this offering.
Depreciation and Amortization
Depreciation and amortization expenses during the year ended March 31, 2015 increased by Rs. 70.1 million, or 28%, to Rs. 322.4 million (US$4.9 million) compared to the same period in 2014. The principal reason for the increase in depreciation was the capitalization of the Punjab 2.1, 2.2 and 2.3 projects, which commenced operations in phases from September 2014 through October 2014 and accounted for depreciation of Rs. 39.1 million in fiscal year 2015; the Karnataka 1 project, which commenced operations in the first quarter of fiscal year 2015 and accounted for depreciation of Rs. 5.5 million in fiscal year 2015; and the Uttar Pradesh 1 project, which commenced operations in the first quarter of fiscal year 2015 and accounted for depreciation of Rs. 4.5 million for fiscal year 2015. In addition, depreciation attributable to the Rajasthan 2 project increased Rs. 13.3 million compared to fiscal year 2014 and depreciation attributable to new commercial rooftop solar power projects increased Rs. 8.7 million compared to fiscal year 2014 due to a full period of operations.
Interest Expense, Net
Net interest expense during the year ended March 31, 2015 increased by Rs. 311.6 million, or 60%, to Rs. 831.8 million (US$12.6 million) compared to the same period in 2014.
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Interest expense increased by Rs. 354.5 million, or 55%, to Rs. 999.6 million (US$15.1 million) compared to the same period in 2014. Interest expense increased primarily as a result of an increase of Rs. 282.3 million on project term loans principally for borrowings related to the Punjab 2.1, 2.2 and 2.3 projects, which commenced operations in phases from September 2014 through October 2014, the Uttar Pradesh 1 and Karnataka 1 projects, which commenced operations in the fourth quarter of fiscal year 2015, the Gujarat rooftop project, which commenced operations in the last quarter of fiscal year 2014, and other commercial rooftop solar power projects that were commissioned during fiscal 2015. In addition, interest expense increased as a result of a Rs. 19.3 million increase in bank charges primarily in connection with new borrowings and a Rs. 52.9 million increase in the fair value of compulsorily convertible instruments.
Interest income increased by Rs. 42.9 million, or 34%, to Rs. 167.8 million (US$2.6 million) for fiscal year 2015, compared to fiscal year 2014. The principal reason for the increase was interest earned on surplus funds invested in money market investments as our funds on deposit increased, in addition to gains from the sale of short term investments.
Loss on Foreign Currency Exchange
Foreign exchange loss for fiscal year 2015 decreased by Rs. 280.9 million, or 48%, to Rs. 299.6 million (US$4.5 million) compared to the same period in 2014. The Indian rupee depreciated against the U.S. dollar from Rs. 60.1 to US$1.00 as of March 31, 2014 to Rs. 62.6 to US$1.00 as of March 31, 2015. This depreciation of the Indian rupee resulted in an increase in realized and unrealized foreign exchange losses of Rs. 42.3 million and Rs. 240.7 million, respectively, on our foreign currency denominated debt. These foreign exchange losses were partially offset by an increase in realized and unrealized gains of Rs. 93.9 million and Rs. 7.3 million, respectively, on our foreign currency option contracts.
Income Tax Expense
Income tax expense increased during the year ended March 31, 2015 by Rs. 237.3 million to Rs. 253.1 million (US$3.8 million), compared to the same period in 2014.
Our effective income tax rate for the year ended March 31, 2015 was 30.3% as compared to 2% for the same period in 2014. The increase in income tax expense and the effective tax rate in fiscal year 2015 was a result of higher taxable profits generated by AZI, which provides certain engineering, procurement and construction services to our Indian subsidiaries. During the year ended March 31, 2015, AZI generated taxable profits of Rs. 976.4 million and reported tax expenses of Rs. 334.9 million (an effective tax rate of 34%), whereas in the previous year, AZI had taxable losses of Rs. 260.6 million and had not reported any tax expense. The increase in taxable profits generated by AZI reflected the higher amount of services provided by them to our Indian subsidiaries in the year ended March 31, 2015, which was reflective of the different level of solar power plant construction in each of the years.
We pay taxes on taxable profits at the individual entity level, in accordance with the tax rates in the relevant jurisdictions. While at the consolidated level, we have never been profitable, AZI and certain Indian and non-Indian subsidiaries at the individual entity level have generated taxable profits. These taxable profits result from services provided by these entities to other subsidiaries and are taxed at the applicable tax rates in the jurisdiction of the entity providing the services. These inter-company transactions and profits are eliminated during consolidation, while the related income tax expense is not eliminated. Furthermore, a portion of our Indian operations qualifies for a tax holiday related to their operating income attributable to undertakings, as defined, in operating solar power plants under section 80-IA of the Indian Income Tax Act, 1961. This holiday is available for a period of ten consecutive years out of 15 years beginning from the year in which the undertaking first generates power (referred to as the Tax Holiday period). We anticipate that we will claim the aforesaid deduction in the last ten years out of 15 years beginning with the year in which we generate power and when we have
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taxable income. Accordingly, our current operations are taxable at the normally applicable tax rates. Due to the Tax Holiday period, a substantial portion of the temporary differences between the book and tax basis of our assets and liabilities do not have any tax consequences as they are expected to reverse within the Tax Holiday period.
The income tax expense and the effective tax rate for the non-Indian subsidiaries decreased for the year ended March 31, 2015 which was a result of the substantially lower level of taxable profits generated by our non-Indian subsidiaries, which provide certain engineering, procurement and construction services to our Indian subsidiaries. During the year ended March 31, 2015, these non-Indian subsidiaries generated taxable loss of Rs. 12 million and nil tax expense, whereas in the previous year, the non-Indian subsidiaries had taxable profits of Rs. 4.4 million and reported tax expenses of Rs. 1.5 million (an effective tax rate of 33%).
The remaining change in our income tax expense was largely attributable to a decrease in our domestic deferred tax expense. During the year ended March 31, 2015, we recorded a domestic deferred tax expense of Rs. 61.1 million, whereas for year ended March 31, 2014, we recorded a domestic deferred tax benefit of Rs. 19 million. The primary reason for the change in the level of domestic deferred tax benefit was due to an increase in prepaid taxes on inter-company transactions and the reversal of the valuation allowance on brought forward losses. During the year ended March 31, 2015, AZI was awarded EPC contracts by certain subsidiaries and these carry forward losses were utilized. Accordingly as of March 31, 2015, we did not have any carry forward losses requiring a valuation allowance.
Our domestic and foreign tax expenses are further described in Note 11 Income Taxes to our consolidated financial statements included elsewhere in this prospectus.
Liquidity and Capital Resources
Azure Power Global Limited does not generate cash from operations in order to fund its expenses. Restrictions on the ability of our subsidiaries to pay us cash dividends as a result of certain regulatory and contractual restrictions may make it impracticable to use such dividends as a means of funding the expenses of Azure Power Global Limited. For a further discussion on our ability to issue and receive dividends, see Dividend Policy.
Our principal liquidity requirements are to finance current operations, service our debt and support our growth. We will continue to use capital in the future to finance the construction of solar power plants. Historically, our operations largely relied on project-level long term borrowings, proceeds from issuance of compulsorily convertible preferred shares and compulsorily convertible debentures, and internally generated cash flows to meet capital expenditure requirements. As a normal part of our business and depending on market conditions, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated electricity sales, increased expenses or other events may cause us to seek additional debt or financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations, additional covenants and operating restrictions. Future financings could result in the dilution of our existing shareholding. In addition, any of the items discussed in detail under Risk Factors elsewhere in this prospectus may also significantly impact our liquidity.
Liquidity Position
We believe that, following the completion of this offering, we will have sufficient liquidity available which will include cash and cash equivalents, borrowings arrangements, and cash flows from operations to meet our anticipated required capital expenditures, debt service obligations, working capital requirements, and contingencies for at least the next twelve months.
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As of December 31, 2015, our liquid assets totaled Rs. 3,744.5 million (US$56.6 million), which was comprised of cash. As of December 31, 2015, we carried cash and short term investments of Rs. 90.5 million (US$1.4 million) held by our non-Indian subsidiaries, which are not readily available to Azure Power Global Limited.
We also have commitments from financial institutions that we can draw upon in the future upon the achievement of specific funding criteria. As of December 31, 2015, we have such commitments amounting to Rs. 6,958.4 million (US$105.1 million) under project-level financing arrangements. These commitments represent the term loan agreement we entered into with Central Bank of India for our commercial rooftop projects in March 2014, and the term loan agreement we entered into with PTC India Financials Services Limited for Punjab 3.1 and 3.2 projects in September 2015.
We have a term loan from Central Bank of India for the DLF rooftop projects for aggregate principal amounts of Rs. 314.5 million (US$4.8 million), of which Rs. 130.7 million (US$2.0 million) was undrawn as of December 31, 2015. This loan bears interest at 12.5 % and is secured by movable and immovable assets of the project. The term of this loan is 14.5 years. Cash distribution from the projects can be made after meeting the project expenses and debt service requirements.
We have a term loan from PTC India Financial Services Limited for the Punjab 3 project for an aggregate principal amount of Rs. 1,370.0 million (US$20.7 million), of which Rs. 137.0 million (US$2.1 million) was undrawn as of December 31, 2015. This loan bears interest at 12.25 % and is secured by movable and immovable assets of the project. The term of this loan is 15 years. Cash distribution from the project can be made after meeting the project expenses and debt service requirements.
We have a term loan from IDBI Bank for the Bihar project for an aggregate principal amount of Rs. 514.5 million (US$7.8 million), which was undrawn as of December 31, 2015. This loan bears interest at 12.50% and is secured by movable and immovable assets of the project. The term of this loan is 15 years. Cash distribution from the project can be made after meeting the project expenses and debt service requirements.
We have a term loan from Indian Renewable Energy Development Agency Ltd. for the Rajasthan 4 project for an aggregate principal amount of Rs. 256.6 million (US$3.9 million), which was undrawn as of December 31, 2015. This loan bears interest at 11.40% and is secured by movable and immovable assets of the project. The term of this loan is 13.5 years. Cash distribution from the project can be made after meeting the project expenses and debt service requirements.
We have a term loan from State Bank of India for the Andhra Pradesh 1 project for an aggregate principal amount of Rs. 2,600.0 million (US$39.3 million), which was undrawn as of December 31, 2015. This loan bears interest at 11.85% and is secured by movable and immovable assets of the project. The term of this loan is 17.75 years. Cash distribution from the project can be made after meeting the project expenses and debt service requirements.
We have a term loan from International Finance Corporation for the Karnataka 3 project for an aggregate principal amount of Rs. 1,993.0 million (US$30.1 million), which was undrawn as of December 31, 2015. This loan bears interest at 11.50% and is secured by movable and immovable assets of the project. The term of this loan is 15 years. Cash distribution from the project can be made after meeting the project expenses and debt service requirements.
We have a term loan from Overseas Private Investment Corporation for rooftop projects for an aggregate principal amount of Rs. 1326.5 million (US$20.0 million), which was undrawn as of December 31, 2015. This loan bears interest at 4.74 % and is secured by movable and immovable assets of the project. The term of this loan is 15 years. Cash distribution from the projects can be made after meeting the project expenses and debt service requirements.
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Generally, under the terms of the loan agreements entered into by the Companys project subsidiaries, the project subsidiaries are restricted from paying dividends to AZI if they default in payment of their principal, interest and other amounts due to the lenders under their respective loan agreements. Certain of AZIs project subsidiaries also may not pay dividends to AZI out of restricted cash.
We are subject to business and operational risks that could adversely affect our cash flows. A material decrease in our cash flows would likely produce a corresponding adverse effect on our borrowing capacity.
Sources of Liquidity
Our ability to meet our debt service obligations and other capital requirements will depend on our future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. Our financing arrangements as of December 31, 2015 consisted of compulsorily convertible preferred shares, compulsorily convertible debentures, project financing arrangements and other borrowings.
Compulsorily Convertible Preferred Shares
Through December 31, 2015 we have raised funds totaling Rs. 6,690.0 million (US$101.0 million), net of related costs, through the issuance of Series A to Series H compulsorily convertible preferred shares. Series A to Series D, Series F and Series H compulsorily convertible preferred shares have been classified in temporary equity in our consolidated balance sheet because these preference shareholders have a right to convert their shares into a fixed number of equity shares. Series E and Series G compulsorily convertible preferred shares have been classified as a liability because Series E and Series G preference shareholders have a right to convert their shares into a variable number of equity shares to give them their required returns.
All series of the compulsorily convertible preferred shares are convertible into equity shares either on the respective maturity date or on the occurrence of specific events based on the terms of respective agreements. In addition, the Series A to D, Series F and Series H compulsorily convertible preference shareholders have a right to convert into equity shares at any point from the date of the respective issuance. Upon the completion of this offering, the Series A to D, Series F and Series H compulsorily convertible preference shareholders will be issued a fixed number of equity shares and the Series E and Series G compulsorily convertible preference shareholders will be issued such number of equity shares so as to provide them a required return. The compulsorily convertible preference shareholders have the right to require us to buy-back these compulsorily convertible preferred shares on the non-occurrence of certain contingent events.
Pursuant to our shareholders agreement, if we do not undertake a Qualified IPO, as defined by the agreement, on or before February 25, 2016, at any time after that date, the Series A, B, C, D, F and H compulsory convertible preference shareholders have an option at their discretion to require us to buy back the shares held by them. Series A to Series D, Series F and Series H compulsorily convertible preferred shares are collectively referred to as Mezzanine compulsorily convertible preferred shares. The buy-back right of these shareholders will be extinguished prior to the initial public offering upon the conversion of these compulsorily convertible preferred shares into equity shares.
The Mezzanine compulsorily convertible preferred shares are being accreted to their buy-back value through February 25, 2016, the earliest buy-back date, on a straight line basis, so that the carrying amount will equal the mandatory redemption at each date.
Unless converted, the term of the Series A compulsorily convertible preferred shares shall be a maximum of 19 years from the date of issue, whereas the terms of the Series B, Series C, Series D , Series F and Series H compulsorily convertible preferred shares shall be a maximum of 20 years from the date of issue. Each of the Series A, Series B, Series D, Series F and Series H compulsorily convertible preferred shares shall be convertible
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into equity shares at the option of the preference shareholders at a conversion ratio of 1:1. The Series C compulsorily convertible preferred shares shall be convertible into equity shares at the option of the preference shareholders at a conversion ratio of 1:0.3423.
At December 31, 2015, we have classified our Series E and Series G compulsorily convertible preferred shares as a current liability of Rs. 1,361.8 million (US$20.6 million), as these instruments have an earliest redemption date of February 25, 2016 and there are no restrictions in Mauritius on buying back as of December 31, 2015.
Compulsorily Convertible Debentures
Through December 31, 2015 we have raised funds totaling Rs. 1,182.0 million (US$17.9 million), through the issuance of compulsorily convertible debentures at coupon rates ranging from 0% to 10% and maturing on various dates from December 2020 to June 2024. Upon the completion of this offering, the debenture-holders will be issued such number of equity shares so as to provide them a required return. The compulsorily convertible debenture-holders have the right to require us to buy-back after converting the compulsorily convertible debentures to equity shares on non-occurrence of certain contingent events.
The compulsorily convertible debenture-holders have the right to require us to buy back on:
|
expiry of the qualified initial public offering due date (i.e., February 25, 2016); or |
|
breach of the funding covenants of the compulsorily convertible debenture-holders. |
At December 31, 2015, we have classified our compulsory convertible debentures as a current liability of Rs. 1,978.9 million (US$29.9 million), as these instruments have an earliest redemption date of February 25, 2016, and there are no restrictions in Mauritius on buying back as of December 31, 2015.
Project-level Financing Arrangements
Our borrowings include project-specific financing arrangements collateralized by the underlying solar power plants. At December 31, 2015, these borrowings had annual interest rates ranging from 4.07% to 6.43% for foreign currency loans and from 11.40% to 12.62% for Indian rupee term loans and 13.75% to 14.00% for short term loans. The table below summarizes certain terms of our project-level financing arrangements as of December 31, 2015:
Outstanding Principal
Amount |
Type of
Interest |
Currency |
Maturity
Date(1) |
|||||||||||||
Name of Project |
Rs. | US$ | ||||||||||||||
(In thousands) | ||||||||||||||||
Punjab 1 |
236,065 | 3,566 | Fixed | US$ | 2022 | |||||||||||
Punjab 2 |
1,835,350 | 27,729 | Floating | Rs. | 2021 | |||||||||||
Gujarat 1 |
1,318,435 | 19,919 | Fixed | US$ | 2025 | |||||||||||
Gujarat rooftop |
125,054 | 1,889 | Floating | Rs. | 2028 | |||||||||||
Rajasthan 1 |
869,668 | 13,139 | Fixed | US$ | 2028 | |||||||||||
Rajasthan 2 |
3,722,708 | 56,243 | Fixed | US$ | 2031 | |||||||||||
Uttar Pradesh 1 |
550,000 | 8,309 | Floating | Rs. | 2026 | |||||||||||
DLF rooftop |
159,036 | 2,403 | Floating | Rs. | 2028 | |||||||||||
Karnataka 1 |
585,000 | 8,838 | Floating | Rs. | 2030 | |||||||||||
Rajasthan 3.1 |
994,000 | 15,017 | Floating | Rs. | 2028 | |||||||||||
Rajasthan 3.2 |
1,798,635 | 27,174 | Floating | Rs. | 2030 | |||||||||||
Rajasthan 3.3 |
2,029,000 | 30,654 | Floating | Rs. | 2028 | |||||||||||
Punjab 3.1 and 3.2 |
1,233,000 | 18,628 | Floating | Rs. | 2030 | |||||||||||
Rajasthan 4 |
250,000 | 3,777 | Floating | Rs. | 2016 | |||||||||||
Chhattisgarh 1.1,1.2 & 1.3 |
1,582,909 | 23,915 | Floating | Rs. | 2029 | |||||||||||
Andhra Pradesh 1 |
600,000 | 9,065 | Floating | Rs. | 2017 | |||||||||||
AZI |
898,000 | 13,567 | Floating | Rs. | 2016 | |||||||||||
|
|
|
|
|||||||||||||
Total |
18,786,860 | 283,832 | ||||||||||||||
|
|
|
|
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(1) | This represents the last repayment period. These loans are repayable on a quarterly or semi-annual basis. For repayment by period of the above-mentioned loans, refer to contractual obligation and commercial commitments. |
Our outstanding project-level borrowings have been secured by certain movable and immovable properties, including property, plant and equipment, and in some cases supported by personal guarantees issued by Mr. Inderpreet Singh Wadhwa (our director and chief executive officer) and Mr. Harkanwal Singh Wadhwa (our director and chief operating officer), as well as a pledge of the shares of the project-level SPVs.
We have project-level commitments from financial institutions that we can draw upon in the future upon the achievement of specific funding criteria. As of December 31, 2015, we have such commitments amounting Rs. 6,958.4 million (US$105.1 million) under project-level financing arrangements. These are expected to be utilized within the next 12 to 18 months.
Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have also personally guaranteed short term loans.
The financing agreements governing our project-level borrowings contain financial and other restrictive covenants that limit our project subsidiaries ability to make distributions to us unless certain specific conditions are met, including the satisfaction of certain financial ratios.
Uses of Liquidity
Our principal requirements for liquidity and capital resources can be categorized into investment for developing solar power plants and debt service obligations. Generally, once operational, our solar power generation assets do not require significant capital expenditures to maintain their operating performance. For principal and interest payments on our debt outstanding as of December 31, 2015, refer to Contractual Obligations and Commercial Commitments included elsewhere in this prospectus.
Capital Expenditures
As of December 31, 2015, we operated 19 utility scale projects and several commercial rooftop projects with a combined rated capacity of 248 MW. As of such date, we were also constructing 10 projects with a combined rated capacity of 240MW and had an additional 316MW of projects committed.
Our capital expenditure requirements consist of:
(i) | Expansion capital expenditures for new projects; and |
(ii) | Working capital spent for building a pipeline for coming year(s). |
Expansion capital expenditures also include interest expense associated with borrowings used to fund expansion during construction phase of the projects. We intend to build/ acquire new projects post the completion of this offering.
Our capital expenditure amounted to Rs. 6,468.6 million (US$97.7 million) for the nine months ended December 31, 2015 primarily for the Rajasthan 3, Punjab 3, Andhra Pradesh 1 and Chhattisgarh 1 solar power projects.
Cash Flow Discussion
We use traditional measures of cash flow, including net cash provided by operating activities, net cash used in investing activities and net cash provided by financing activities, as well as cash available for distribution to evaluate our periodic cash flow results.
Cash and cash equivalents include cash on hand, demand deposits with banks, term deposits and all other highly liquid investments purchased with an original maturity of three months or less at the date of acquisition
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and that are readily convertible to cash. It does not include restricted cash which consists of cash balances restricted as to withdrawal or usage and relate to cash used to collateralize bank letters of credit supporting the purchase of equipment for solar power plants, bank guarantees issued in relation to the construction of the solar power plants within the timelines stipulated in PPAs and for certain debt service reserves required under our loan agreements.
Nine Months Ended December 31, 2015 Compared to Nine Months Ended December 31, 2014
The following table reflects the changes in cash flows for the comparative periods:
For Nine Months Ended
December 31, |
||||||||||||||||
2014 | 2015 | Change | ||||||||||||||
Rs. | Rs. | US$ | Rs. | |||||||||||||
(In thousands) | ||||||||||||||||
Cash flow data |
||||||||||||||||
Net cash provided by operating activities |
542,747 | 1,529,064 | 23,102 | 986,317 | ||||||||||||
Net cash (used in) investing activities |
(5,288,079 | ) | (7,191,377 | ) | (108,647 | ) | (1,903,298 | ) | ||||||||
Net cash provided by financing activities |
6,188,887 | 7,357,627 | 111,160 | 1,168,740 |
Operating Activities
During the nine months ended December 31, 2015, we generated Rs. 1,529.1 million (US$23.1 million) of cash in operating activities. This cash inflow primarily resulted from a net loss during the nine months ended December 31, 2015 of Rs. 1,061.4 million reduced by non-cash items including change in fair value of compulsorily convertible debentures, Series E and Series G compulsorily convertible preferred shares of Rs. 395.5 million, depreciation and amortization of Rs. 495.6 million and realized and unrealized foreign exchange loss, net of Rs. 337.1 million resulting from depreciation of the rupee, in addition to changes in operating assets and liabilities including a Rs. 1,787.8 million increase in other liabilities, deferred revenue and account payables primarily in connection with obligations to supplier and contractors and receipt of VGF, a Rs. 201.6 million increase in other assets primarily in connection with advances paid to suppliers and contractors and a Rs. 392.7 million increase in accounts receivable and prepaid expenses and other current assets primarily resulting from options premium paid in connection with our hedging activities, prepaid income taxes and debt financing cost and interest receivable on term deposits.
During the nine months ended December 31, 2014, we generated Rs. 542.7 million of cash in operating activities. This cash inflow primarily resulted from a net loss during the nine months ended December 31, 2014 of Rs. 884.9 million reduced by non-cash items including change in fair value of compulsorily convertible debentures and Series E compulsorily convertible preferred shares of Rs. 228.9 million, depreciation and amortization of Rs.218.0 million and realized and unrealized foreign exchange loss, net of Rs. 368.6 million resulting from depreciation of the Rupee, deferred income taxes of Rs. 49.7 million in addition to changes in operating assets and liabilities including a Rs. 695.6 million increase in other liabilities and account payables primarily in connection with obligations to supplier and contractors, a Rs. 241.7 million increase in other assets primarily in connection with advances paid to suppliers and contractors, a Rs. 107.7 million increase in deferred revenue and interest payable and Rs. 16.2 million increase in accounts receivable and prepaid expenses and other current assets primarily resulting from options premium paid in connection with our hedging activities, prepaid income taxes and debt financing cost and interest receivable on term deposits.
Investing Activities
During the nine months ended December 31, 2015, we utilized Rs. 7,191.4 million (US$108.6 million) in our investing activities. This cash outflow was primarily due to Rs. 6,468.6 million incurred to purchase
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property, plant and equipment primarily related to the construction of our Rajasthan 3.1, 3.2 and 3.3 solar power projects, Chhattisgarh 1.1 and 1.2 solar power projects, Punjab 3.1 and 3.2 solar power projects and Andhra Pradesh 1 solar power project offset by a net sale of Rs. 34.08 million of non-current investments. In addition, we raised cash amounting to Rs. 316.0 million from the sale of redeemable non-controlling interests.
During the nine months ended December 31, 2014, we utilized Rs. 5288.1 million in investing activities. This cash outflow was primarily due to Rs. 4838.1 million incurred to purchase property, plant and equipment primarily related to the construction of our Punjab 2.1, 2.2 and 2.3 solar power projects and a net increase in our available for sale investments of Rs. 134.9 million and redemption of Rs. 301.1 million of investments in terms deposits with banks.
Financing Activities
During the nine months ended December 31, 2015, we generated Rs. 7,357.6 million (US$111.2 million) from financing activities. This cash inflow was primarily due to new loan proceeds of Rs. 5,020.8 million in the form of term loans from banks for our Rajasthan 3, Chhattisgarh 1, Punjab 3, Andhra Pradesh 1 and Rajasthan 4 solar power plants and Rs 4,237.4 million proceeds from Series G and Series H compulsorily convertible preferred shares. These inflows were offset in part by Rs. 1,900.7 million in repayment of loans.
During the nine months ended December 31, 2014, we generated Rs. 6,188.9 million from financing activities. This cash inflow was primarily due to Rs. 1,502.3 million in proceeds from the issuance compulsorily convertible debentures and Series F preferred shares and new loan proceeds of Rs. 4,942.3 million. These inflows were offset in part by Rs. 255.7 million in repayment of loans.
Year Ended March 31, 2015 Compared to Year Ended March 31, 2014
The following table reflects the changes in cash flows for the comparative periods:
For Fiscal Year Ended March 31, | ||||||||||||||||
2014 | 2015 | Change | ||||||||||||||
Rs. | Rs. | US$ | Rs. | |||||||||||||
(In thousands) | ||||||||||||||||
Cash flow data |
||||||||||||||||
Net cash used in operating activities |
(23,401 | ) | (176,680 | ) | (2,668 | ) | (153,279 | ) | ||||||||
Net cash used in investing activities |
(14,426 | ) | (9,050,994 | ) | (136,743 | ) | (9,036,568 | ) | ||||||||
Net cash provided by financing activities |
1,059,305 | 9,672,089 | 146,125 | 8,612,784 |
Operating Activities
During the fiscal year ended March 31, 2015, we utilized Rs. 176.7 million (US$2.7 million) of cash in our operating activities. This cash outflow primarily resulted from a net loss during the year ended March 31, 2015 of Rs. 1,088.6 million, reduced by non-cash items including change in fair value of compulsorily convertible debentures and Series E compulsorily convertible preferred shares of Rs. 286.3 million, depreciation and amortization of Rs. 322.4 million and realized and unrealized foreign exchange loss, net of Rs. 299.6 million resulting from a depreciation of the Rupee, in addition to changes in operating assets and liabilities including a Rs. 334.5 million increase in other liabilities primarily in connection with obligations to suppliers and contractors, a Rs. 241.1 million increase in other assets primarily in connection with advances paid to suppliers and contractors and a Rs. 118.3 million increase in prepaid expenses and other current assets primarily resulting from options premiums paid in connection with our hedging activities, prepaid income taxes and debt financing cost and interest receivable on term deposits .
During the fiscal year ended March 31, 2014, we utilized Rs. 23.4 million of cash in our operating activities. This cash outflow primarily resulted from a net loss during the year ended March 31, 2014 of Rs. 775.4 million,
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reduced by non-cash items such as depreciation and amortization, deferred income taxes, amortization of debt financing costs and deferred rent totaling Rs. 248.5 million, change in fair value of compulsorily convertible debentures and Series E compulsorily convertible preferred shares of Rs. 190.3 million, share based compensation expenses of Rs. 4.4 million, and realized and unrealized foreign exchange loss of Rs. 580.6 million and an increase in deferred revenue of Rs. 86.3 million. This was offset in part by an increase in accounts receivable of Rs. 36.0 million, other assets of Rs. 177.9 million, a decline in other liabilities of Rs. 110.6 million and a decline in accounts payable of Rs. 29.1 million.
Investing Activities
During the fiscal year ended March 31, 2015, we used Rs. 9,051.0 million (US$136.7 million) of cash in our investing activities. This cash outflow was primarily due to Rs. 8,426.0 million incurred to purchase property, plant and equipment principally related to plant and machinery for the Punjab 2.1, 2.2 and 2.3, Uttar Pradesh 1 and Karnataka 1 solar power projects offset in part by Rs. 927.9 million of proceeds from sale of available for sale investments.
During the fiscal year ended March 31, 2014, we used Rs. 14.4 million of cash in our investing activities. This cash outflow was primarily due to Rs. 372.0 million incurred to purchase property, plant and equipment principally related to plant and machinery for the Gujarat rooftop solar power project and the DLF rooftop solar power project offset in part by Rs. 350.3 million of proceeds from maturity of term deposits with banks.
Financing Activities
During the fiscal year ended March 31, 2015, we generated Rs. 9,672.1 million (US$146.1 million) of cash from our financing activities. This cash inflow was primarily due to new loans with proceeds of Rs. 8,399.0 million in the form of term loans from banks for our Punjab 2, Uttar Pradesh 1 and Karnataka 1 solar power projects, proceeds of Rs. 1,549.0 million through the issue of 138,333 shares of Series F compulsorily convertible preferred shares and Rs. 180.0 million from the issuance of compulsorily convertible debentures. These inflows were offset in part by Rs. 452.9 million in repayment of loans during the year and Rs. 3.0 million of expenses incurred in connection with this offering.
During the fiscal year ended March 31, 2014, we generated Rs. 1,059.3 million of cash from our financing activities. This cash inflow was primarily due to loan proceeds of Rs. 977.3 million in the form of term loans from banks for our Punjab 2 solar power project, our Gujarat rooftop solar power project and our DLF rooftop solar power project and proceeds of Rs. 491.4 million through the issue of 140,000 shares of Series E compulsorily convertible preference shares. These inflows were offset in part by Rs. 409.4 million in repayment of loans during the year.
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Contractual Obligations and Commercial Commitments
We have contractual obligations and other commercial commitments that represent prospective cash requirements. The following table summarizes our outstanding contractual obligations and commercial commitments as of December 31, 2015.
Payment due by Period | ||||||||||||||||||||
Under 1
year |
1-3
Years |
3-5
Years |
Over 5
years |
Total | ||||||||||||||||
(Rs. in thousands) | ||||||||||||||||||||
Contractual cash obligations(1) |
||||||||||||||||||||
Long-term debt (principal)(2) |
820,185 | 2,285,685 | 2,465,745 | 11,467,245 | 17,038,860 | |||||||||||||||
Long-term debt (interest)(3) |
1,788,447 | 2,975,734 | 2,519,915 | 5,240,858 | 12,524,954 | |||||||||||||||
Short-term debt |
1,748,000 | | | | 1,748,000 | |||||||||||||||
Operating lease obligations |
5,395 | 44,084 | 44,084 | 1,079,265 | 1,172,828 | |||||||||||||||
Purchase obligations(4) |
9,202,467 | | | | 9,202,467 | |||||||||||||||
Asset retirement obligations |
| | | 92,513 | 92,513 | |||||||||||||||
Total contractual obligations (Rs.) |
13,564,494 | 5,305,503 | 5,029,744 | 17,879,881 | 41,779,622 | |||||||||||||||
Total contractual obligations (US$) |
204,933 | 80,156 | 75,989 | 270,130 | 631,208 |
(1) | Excludes compulsorily convertible debentures and Series E and Series G compulsorily convertible preferred shares as they are convertible into equity shares and not repayable. |
(2) | The long-term debt includes project secured term loans, other secured bank loans. The long-term debt (principal) obligations for foreign currency denominated project borrowings have been converted to Indian rupees using the closing exchange rate as of December 31, 2015 as per Reserve Bank of India. |
(3) | Interest on long-term debt is calculated based on the outstanding balance of the debt at the prevailing interest rate for the corresponding periods. |
(4) | Consists of asset purchase commitment for construction of solar power plants. |
The following table summarizes our outstanding contractual obligations and commercial commitments as of March 31, 2015.
Payment due by Period | ||||||||||||||||||||
Under 1
year |
1-3
Years |
3-5
Years |
Over 5
years |
Total | ||||||||||||||||
(Rs. in thousands) | ||||||||||||||||||||
Contractual cash obligations (1) |
||||||||||||||||||||
Long-term debt (principal)(2) |
1,266,344 | 2,675,859 | 1,949,095 | 9,380,355 | 15,271,653 | |||||||||||||||
Long-term debt (interest)(3) |
1,353,916 | 2,409,087 | 1,742,544 | 3,823,363 | 9,328,910 | |||||||||||||||
Operating lease obligations |
13,326 | 27,304 | 25,618 | 596,680 | 662,928 | |||||||||||||||
Purchase obligations(4) |
1,688,983 | | | | 1,688,983 | |||||||||||||||
Asset retirement obligations |
| | | 70,942 | 70,942 | |||||||||||||||
Total contractual obligations (Rs.) |
4,322,569 | 5,112,250 | 3,717,257 | 13,871,340 | 27,023,416 | |||||||||||||||
Total contractual obligations (US$) |
65,305 | 77,236 | 56,160 | 209,569 | 408,270 |
(1) | Excludes compulsorily convertible debentures and Series E compulsorily convertible preferred shares as they are convertible into equity shares and not repayable. |
(2) | The long-term debt includes project level secured term loans, other secured bank loans. The long-term debt (principal) obligations for foreign currency denominated project level borrowings have been converted to Indian rupees using the closing exchange rate as of December 31, 2015 as per Reserve Bank of India. |
(3) | Interest on long-term debt is calculated based on the outstanding balance of the debt at the prevailing interest rate for the corresponding periods. |
(4) | Consists of asset purchase commitment for construction of solar power plants. |
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Off-Balance Sheet Arrangements
The terms of our PPAs provide for the annual delivery of a minimum amount of electricity at fixed prices. Under the terms of the PPAs, we have issued irrevocable performance bank guarantees totaling Rs 1,355.0 million (US$20.5 million) as of December 31, 2015. We have also given guarantees as a part of the bidding process for setting up of solar power plants amounting to Rs. 842.7 million (US$12.7 million) as of December 31, 2015. We are not party to any other off-balance sheet arrangements.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity is required to follow five steps which comprises of: (a) identifying the contract(s) with a customer; (b) identifying the performance obligations in the contract; (c) determining the transaction price; (d) allocating the transaction price to the performance obligations in the contract and (e) recognizing revenue as the entity satisfies a performance obligation. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, under either retrospective or retrospective with cumulative effect adoption. Early application is not permitted. We are currently assessing the potential effects of these changes to the consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12 Stock Compensation Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The ASU clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance is effective for annual and interim periods for fiscal years beginning on or after December 15, 2015. Entities can apply the amendment either prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We are currently assessing the potential effects of these changes to the consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements Going Concern which requires an entitys management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entitys ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued. The ASU defines and clarifies that substantial doubt exists when conditions and events indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date financial statements are issued or available to be issued. The ASU requires management to perform the assessment every interim and annual period. The ASU applies to all entities and is effective for the annual period ending after December 15, 2016. Early application is permitted but has not been chosen by Company. The Company is currently assessing the impact of adopting this standard.
In January 2015, the FASB issued ASU No. 2015-01 Income Statement-Extraordinary and unusual items which simplifies the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. The ASU applies to all entities and is effective for the annual period beginning on or after December 15, 2015. The Company has not classified any transaction as extraordinary or unusual to date.
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In February 2015, the FASB issued Accounting Standards Update No. 2015-03 Interest-Imputation of Interest (Subtopic 835-30)-Simplifying the Presentation of Debt Issuance Cost which requires the discount or premium and debt issuance costs to be reported in the balance sheet as a direct deduction from the face amount of debt liability. Further amortization of such costs shall be reported as interest expense. The amendments in this update are effective for financial statements issued for fiscal year beginning after December 15, 2015. The Company is currently assessing the impact of presentation change per the ASU and no estimate of the impact is currently available.
In February 2015, the FASB issued Accounting Standards Update No. 2015-02 Consolidation Amendments to the Consolidation Analysis which modifies the existing consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination, and (iv) certain investment funds. The ASU is effective for fiscal year and interim periods within those years beginning after December 15, 2015. The ASU is presently expected to have an impact on the Companys consolidated financial statements as the Company does not have any interest in such entities.
In August 2015, FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements (ASU No. 2015-15). This ASU indicates that the guidance in ASU No. 2015-03 did not address presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. Given the absence of authoritative guidance within ASU No. 2015-03, the SEC staff has indicated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The Company does not expect the adoption of ASU No. 2015-15 to have any effect on the Companys financial position or results of operations.
In November 2015, FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This guidance requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position. The guidance is effective for interim and annual periods beginning after December 15, 2016, and may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is evaluating the potential effects of these changes to its consolidated financial statements.
Seasonality
The energy output performance of our plants is dependent in part on the amount of sunlight. As a result, our revenue in the past has been impacted by shorter daylight hours in winters. Typically, our revenue is the lowest in the third quarter and highest in the first quarter of any given fiscal year, which for us ends on March 31.
Inflation
In general, our existing PPAs do not contain inflation-based price increase provisions. Our operations are primarily conducted in India, where in the past high inflation has been experienced. To the extent that our business experiences high rates of inflation, thereby increasing our operating costs, we may not be able to generate sufficient revenues to offset the effects of inflation, which could materially and adversely affect our business, financial condition, results of operations and cash flows.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to several market risks in our normal business activities. Market risk is the potential loss that may result from market changes associated with our business or with an existing or forecasted financial or commodity transaction. The types of market risks we are exposed to are interest rate risk and foreign currency risk.
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Interest Rate Risk
As of December 31, 2015 our long-term debt was at both fixed and variable interest rates. Exposure to interest rate fluctuations will depend on the amount of debt that bears interest at variable rates, the time at which the interest rate is adjusted and the quantum of fluctuation in the interest rate.
Our results of operations are subject to interest rate fluctuations on our variable rate borrowings. The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative financial instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole period.
A hypothetical increase or decrease in our variable interest rates by 1% would not have had a significant effect on our loss for the nine months ended December 31, 2015.
We intend to use hedging strategies to mitigate our exposure to interest rate fluctuations, we may not hedge all of our interest rate risk and, to the extent we enter into interest rate hedges, our hedges may not necessarily have the same duration as the associated indebtedness. Our exposure to interest rate fluctuations will depend on the amount of indebtedness that bears interest at variable rates, the time at which the interest rate is adjusted, the amount of the adjustment, our ability to prepay or refinance variable rate indebtedness when fixed rate debt matures and needs to be refinanced and hedging strategies we may use to reduce the impact of any increases in rates.
Foreign Currency Risk
The functional currency of AZI is Indian rupees. We have long term debts denominated in U.S. dollars and Indian rupees. Fluctuations in the exchange rates between U.S. dollars and Indian rupees may result in higher fair value adjustments on our outstanding foreign currency loans, thereby adversely impacting our earnings.
We also have two international subsidiaries and major purchases of material are transacted in U.S. dollars. Consequently, we are exposed to foreign exchange risk on purchases from overseas suppliers. The exchange rate between Indian rupees and U.S. dollars has fluctuated significantly in recent years and may continue to fluctuate in the future. Depreciation of the Indian rupee against the U.S. dollar can adversely affect our results of operations.
We have partially hedged against debts denominated in U.S. dollars in order to minimize an adverse impact of a large currency movement. These hedges are for a period of up to three years. We have taken foreign currency loans for our Punjab 1, Gujarat 1, Rajasthan 1 and Rajasthan 2 projects.
As of December 31, 2015 we have outstanding option contracts with notional value of US$17.9 million for hedging the foreign currency risk on borrowings denominated in U.S. dollars. The remaining term of these contracts as of December 31, 2015 ranges from 3 months to 12 months. These option contracts have a fair value on each reporting date. The changes in the fair value of these option contracts are recognized in the consolidated statements of operations and are included in foreign exchange loss.
We continue to monitor our risks and will consider hedging significant foreign currency exposures on an ongoing basis.
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Overview of the Indian Power Sector
Growing Indian Economy to Drive Demand for Power
The Reserve Bank of India estimates the Gross Domestic Product, or GDP, of India to be US$1.7 trillion in fiscal year 2015, which places the country as one of the top ten largest economies by GDP in the world. In addition, Indias economy is among the fastest growing economies, with real GDP growth averaging 7.6% over the decade ended fiscal year 2014 according to the Reserve Bank of India. The growth rate, as revised to reflect the Indian Ministry of Statistics and Program Implementations recent amendment to its GDP calculation methodology, was 6.9% for fiscal year 2014, was 7.3% in fiscal year 2015 and is expected to be 7.4% in fiscal year 2016 according to the Reserve Bank of India.
Indian economic planning was governed by the Planning Commission of India, which published its Five-Year Plans to monitor and encourage growth since 1951. As economic growth is dependent in part on infrastructure development, economic policy formation in India is focused on infrastructure investment. The current, or Twelfth Five-Year Plan calls for a total investment of US$0.9 trillion in infrastructure spending that represents a 130% increase relative to the Eleventh Five-Year Plan. The planning commission of India has been replaced by the National Institution for Transforming India, or NITI Aayog, by the new government.
Historically, there has been a correlation between real GDP growth and energy demand, and we believe that the Indian economy will continue to experience a rise in energy demand. Indias overall GDP and energy demand have increased significantly over the past several years primarily due to population growth, rapid industrialization and rising standards of living. Energy supply, however, has been unable to keep pace with this growing demand, which has resulted in a persistent demand/supply mismatch and an average energy deficit of 8.3% in the last decade.
Strong GDP Growth Driving Energy Demand |
Sources: Indian Ministry of Power 2013 2014 Annual Report; Handbook of Statistics on the Indian Economy by Reserve Bank of India; Load Generation Balance Report, 2015 16 by Central Electricity Authority
* | Data for these years has been revised to reflect the Indian Ministry Of Statistics And Program Implementations recent amendment to its GDP calculation methodology. |
Conventional Energy Growth to Face Challenges
Indias new capacity additions have historically been lower than the targeted capacity in its Five-Year Plans. For example, in the Eleventh Five-Year Plan, actual capacity additions represented only 70% of the targeted
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capacity of 78.7GW. This shortfall in capacity additions was due to issues in timely commissioning of conventional power plants, which included delays in land acquisition, obtaining regulatory permits and difficulties in securing reliable and cost efficient fuel supplies. Under the prior Five Year Plans before the Eleventh Five-Year Plan, solar capacity targets were not included. As such, there is a short track record of meeting solar capacity targets. As for reaching target capacity for other renewable energy sources, in certain Five Year Plans those targets were met while others have fallen short.
The Indian power sector has been traditionally dependent on thermal power with 70% of the installed power capacity generated from conventional sources of energy (coal, oil and natural gas) as of fiscal year 2015. Projections under the Twelfth Five-Year Plan indicate a high dependence on imported energy sources and a shift in focus to domestic renewable energy sources. Per the Twelfth Five-Year Plan projections, total domestic energy production will reach 669.5 million tons of oil equivalent, or mtoe, by fiscal year 2017 and 844.2 mtoe by fiscal year 2022. This will meet around 71% and 69% of expected energy consumption, respectively, with the balance met from imports of crude oil, gas and coal, which is projected to be about 267.8 mtoe by fiscal year 2017 and further increase to 375.6 mtoe by fiscal year 2022. Import dependence on coal, the dominant fuel source in India, is also projected to increase from 18.8% in fiscal year 2012 to 22.4% by 2017. This strong dependence on imports and issues in procuring imports at economically viable levels has led to slowed growth in generation from coal, lignite and gas-fired power plants and a decline in the overall plant load factors to 65% during fiscal year 2015 from 66% during fiscal year 2014.
Nuclear energy in the country has been traditionally developed by the federal government. Until recently, efforts to fast track development after the IndiaUnited States Civil Nuclear Agreement through import of nuclear reactors have not been successful primarily due to no fault liability requirements levied on operators. During President Obamas trip to India in January 2015, the Indian government indicated that it would work with state-backed insurers to create an insurance pool for accident victims while indemnifying suppliers against liability. However, clarity around the mechanism is yet to be crystallized. Indias indigenous nuclear program has also seen limited progress. Moreover, there is public opposition in the country to nuclear power expansion based on safety and environmental grounds. These factors coupled with construction periods of up to ten years are likely to result in limited expansion of nuclear power in the country.
India also has rich potential for hydro capacity. However, a large portion of such capacity has already been harnessed in most areas where electricity transportation infrastructure is not a constraint and where geological challenges are limited. Untapped areas represent significant challenges in engineering and electricity transportation infrastructure for large hydro plants.
Overview of the Indian Renewables Sector
Renewable energy sources such as solar and wind are expected to continue to become significant contributors to Indias overall capacity growth. In the past five years, renewable capacity growth has outpaced other sources of generation.
Source: MNRE, Central Electricity Authority, March 2015 Installed Capacity Report.
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The significant expansion in renewable installed capacity has been driven by a number of country-specific factors including a persistent energy deficit, limited access to fossil fuels, renewable generation pricing approaching grid parity and a progressive regulatory framework. We believe renewable energy not only supports the national agenda of a sustainable and inclusive growth, but is an integral solution to meeting Indias energy needs and achieving energy security in the future.
Further, according to the Indian Ministry of New and Renewable Energy, or MNRE, approximately 55% of the 167.8 million rural households in India have access to electricity, with the others largely dependent on traditional fuel like firewood, crop residue and dung cake. Some of these households are located in areas that represent economic and technical challenges to building distribution lines. Hence, decentralized distributable renewable energy based initiatives, such as micro-grids, are likely to be contributors to capacity additions going forward.
Solar and Wind to be Key Renewable Fuels With Solar Growing Relatively Faster |
Source: MNRE, Central Electricity Authority March 2015 Installed Capacity Report.
Renewable capacity installations in India as of March 2015 represent only 13% of all installed capacity in the country, a small percentage of the actual potential in India. According to estimates by the Indian Ministry of Power, 139GW of incremental renewable capacity addition is expected by fiscal year 2022, representing a compound annual growth rate, or CAGR, from 2015 to 2022 of approximately 26%. Solar power capacity is expected to reach 100GW by 2022, which represents 69% of total renewable capacity additions implying an approximately 60% CAGR, making solar one of the fastest growing sources of energy in India. MNRE estimates 749GW of domestic solar potential, which is approximately 84% of 897GW of renewable potential. As a result, technologies for both conversion of solar radiation into heat and electricity, namely, solar thermal and solar photovoltaics, can effectively be harnessed providing huge scalability for solar in India. India has in the past opportunistically exploited wind and hydro potential in the country in most areas where evacuation was not a constraint. Wind power in the country is more mature but has faced issues such as limited availability of good sites and difficulties with securing reliable evacuation. Biomass is facing supply level constraints, as long term availability of firm feedstock at pre-determined pricing is unavailable.
Overview of the Indian Solar Power Generation Sector
Considering the current developments and targeted achievements, we believe that solar installed capacity will grow faster than other renewable energy sources. This robust growth is expected to be driven by a relatively small installed base of solar capacity, favorable geographic conditions and a supportive policy framework.
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Solar capacity development was catalyzed in 2010 by the announcement of the Jawaharlal Nehru National Solar Mission, or NSM, and consistent efforts by the government since then. The NSM is being accomplished by the Indian government in several phases. In Phase I, the India solar sector achieved 1,684MW of solar capacity addition between 2010 and 2013, significantly higher than the targeted capacity addition of 1,100MW. Indian solar installations reached 3.7GW at the end of fiscal year 2015 with capacity spanning more than 15 states and union territories in the country given favorable irradiation in much of the country. The growth in the past few years has been due to a confluence of changing market dynamics, falling equipment costs, increased reliability as well as a strong regulatory and policy support to provide impetus to the growth of solar capacity installations.
The Indian government recently increased its target for solar capacity to 100GW by 2022. The central government, in collaboration with the state governments, is planning to facilitate the development of 25 solar power parks of 500MW to 1,000MW each to boost the solar capacity in high solar irradiation states. The state governments will identify land for the proposed solar parks, provide permits and related infrastructure such as grid interconnect systems while a government sponsored entity will commit to buy power produced from these parks.
To foster the development of 100GW of solar power in the country, India is engaging with international investors. Multilateral agencies such as Asian Development Bank, KfW and International Finance Corporation are already active in the country and have made investments in Indian solar companies. Most recently, it has been reported that several U.S. agencies committed approximately $4 billion to Indian solar companies $2 billion from the U.S. Trade and Development Agency, $1 billion from the U.S. Overseas Private Investment Corporation and $1 billion from the Export-Import Bank of the United States.
Renewable Power Generation Costs Have Begun to Approach Grid Parity
The increasing dependence on imported fossil fuels, which dominate Indias power generation, and associated volatility in prices have resulted in increases in conventional generation costs. State utilities, which are the largest offtakers of power in the country, have seen power purchase costs rise primarily due to the high cost of generation from use of imported coal and project delays and associated cost escalations due to delays in securing land and permits in a timely manner. While India generates less than 5% of its electricity using oil according to the World Bank, Indian industrial and commercial consumers, who cross-subsidize agricultural and retail consumers and typically run diesel-powered generators when grid power is unavailable, have also experienced significant increases in power costs.
While the cost of conventional power generation has trended upwards, the cost of solar energy in the country has trended down as independent solar power producers reduced generation costs primarily driven by a mix of persistent decline in global solar panel prices per watt and adoption of innovative business practices. The effect of Indian rupees depreciating was offset by prices of solar panel prices per watt falling faster and an increase in panel and operational efficiencies. More importantly, solar panel prices per watt are expected to fall further, which in turn is expected to further drive solar tariffs lower.
The Indian government has also included renewable energy projects in the priority sector lending norms for commercial banks operating in India, and the Indian government has approved the issuance of tax-free infrastructure bonds for funding renewable energy projects during fiscal year 2016.
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An analysis of current tariffs in India indicates that solar power is now competitive with wind, new thermal capacity fueled by imported coal and grid power tariffs for commercial users.
Solar Power Tariffs are Competitive vis-à-vis the Other Sources |
(1) | This does not include any subsidies. |
(2) | Benchmark tariff for solar for the year fiscal year 2016 as provided by Central Electricity Regulatory Commission. |
(3) | Tariff at which thermal power companies contracted to sell power to the Tamil Nadu Generation and Distribution Corporation for 15 years. |
(4) | Wind power tariff announced by Rajasthan State for fiscal year 2016 plus Rs. 0.5/kWh of generation based incentive assumed to be the representative tariff. |
(5) | Diesel and gas prices based on the average of the range as per Lazard Levelized Cost of Energy Analysis, November 2015. |
Further, an analysis of tariffs for commercial users in India indicates that solar tariffs in some states are already at grid parity for commercial users.
Solar Power Tariffs Are Competitive Vis-À-Vis The Commercial Tariffs Across India |
Source: | Retail supply tariffs for non domestic units for FY 2015-16 (FY 2014-15 for Rajasthan) |
Note: | Commercial tariff for 50 kW and above or more than 500 units/month, wherever applicable |
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As it approaches grid parity, we believe solar power is likely to be seen more as a viable energy source, not just as an alternative to other renewable sources, and also rival significant proportions of conventional grid power.
Indias Tremendous Solar Potential
India ranks among the highest irradiation receiving countries in the world due to its location between the Tropic of Cancer and the Equator. On average, India receives 250 to more than 300 days of sunshine per year in much of the country with most areas receiving 4 to 7 kilowatt hour per square meter per day. This allows for solar capacity to be built across the country, unlike wind capacity that tends to be concentrated along the coast.
Indias Average Solar Irradiation Amongst the Highest in the World |
Source: | Bridge to India Report, June 2014. |
Solar Policy Framework
India implemented renewable purchase obligations, or RPOs, in 2010 towards its goal of meeting an ambitious target of supplying 15% of the energy demand in the national grid by renewable sources by 2020. Since then RPOs have been a key driving force of renewable capacity in the country. The obligated entities are public power distribution companies, the captive power consumers and industrial consumers who are supplied dedicated power through high voltage distribution systems. Such obligated entities can fulfill their requirement by buying power from a renewable source or they can buy renewable energy certificates in the market. RPOs are of two types in India solar RPOs, which can be met only through solar power, and non-solar RPOs, which can be met through wind, biomass and other types of recognized renewable sources.
The NSM includes RPOs as being a key driver for promoting solar power. Further, the National Tariff Policy was amended in 2011 to prescribe that solar RPO be increased from a minimum of 0.25% in 2012 to 3% in 2022. In May 2015, the Supreme Court of India upheld a regulation that made it compulsory for captive power plants and open access consumers to purchase electricity to fulfill their RPOs. This landmark judgment is expected to boost the demand for renewable energy by captive players and also improve the marketability of renewable energy certificates in India. Auctions held by the central government under the NSM focus on lowering solar power costs by either bundling solar power with coal power or by subsidizing project costs. Some other incentives offered to solar developers by the central government include:
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income tax holidays: 10-year tax holidays for projects during which only a minimum alternate tax of approximately 21.34% is charged instead of the normal corporate tax rate of 34.61%; |
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accelerated depreciation provision that allows for developers to depreciate up to 100% of the project cost in the first year of installation; |
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environmental compliance exemptions; and |
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entry, custom and excise duty exemptions. |
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State governments have independent solar policies that foster development of solar capacity by typically offering relatively higher offtake tariffs than conventional power. There is significant divergence in the tariffs and incentives provided to developers by states as these are largely driven by location of projects, land prices, scale of existing projects and competitive intensity in the respective states. After focusing largely on utility scale solar projects, state policies have recently released state-specific net-metering policies that are expected to encourage development of rooftop projects.
Renewable Auction Process
The auction process for solar projects is typically through published guidelines by the relevant central and state governments. For instance, bids under the NSM are evaluated in a two-stage process that ensures bids meet the financial and technical criteria, with remaining qualified bidders judged based on the tariff requested. Bids are opened and evaluated in the presence of all auction participants.
Financial Criteria
In the first round of bidding, each bidder must submit their historical audited financial statements and calculate net worth as defined by the auction guidelines. Each auction will require a minimum net worth per megawatt of bid capacity and bidders must meet or exceed this hurdle. For example, auctions under Phase I Batch II of the NSM required approximately Rs. 20 million per megawatt bid. Further, participants are required to post earnest money in the form of bank guarantees at the time of bidding and performance bank guarantees at the time of signing the offtake agreement. For example, auctions under Phase I Batch II of the NSM required Rs. 1 million per megawatt as earnest money deposit and Rs. 2 million per megawatt at the time of signing the offtake agreement. Auction participants that successfully meet the required financial criteria progress to the second round of the auction process.
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The auction decision process is a reverse bidding process, in which participating developers bid for solar projects by quoting their required tariffs per kilowatt hour, or in other cases, their required viability gap funding, or VGF, amount provided by the Solar Energy Corporation of India, which refers to the subsidy on capital expenditure per megawatt. After the financial bids are opened, the quoted tariffs or VGF amounts from all the qualified bidders are sorted in ascending order, and projects are allocated to the bidders starting from the lowest bidder, until the total auctioned capacity is reached. Bids are accepted at their quoted tariff or VGF levels rather than all winning bidders receiving the lowest tariff or VGF. Auction participants that successfully meet the required criteria progress to the second round of the technical process.
Technical Criteria
Bids are generally evaluated based on the selected module technology as well as each bidders development and execution history. Some of the factors that may be considered include:
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preliminary project analysis and feasibility study on site location and inter-connection details; |
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only commercially established and operating technologies will be considered; |
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bidder ability to execute on development plans (and corresponding capital expenditures) that successfully achieved commissioning; and |
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additional criteria sometimes include local content requirements, such as requirements to use Indian photovoltaic module manufacturers, and the bidders total operational megawatts. |
NSM Targets and Achievements
The NSM had previously set a target of putting into operation 20GW of grid-connected solar power by 2022 through long-term policy, large-scale operation goals, aggressive research and development and development of a comprehensive domestic solar ecosystem. The government increased this goal from 20GW to 100GW in December 2014 which was approved by the Cabinet in June 2015. The 100GW target capacity will be comprised of 40GW rooftop and 60GW of large and medium scale grid connected solar power projects, as described in the tables below.
Targets under NSM | ||||||||||
Category I |
Proposed
Capacity (MW) |
Category II |
Proposed
Capacity (MW) |
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Rooftop Solar |
40,000 | Scheme for Decentralized Generation of Solar Energy Projects by Unemployed Youths & Farmers | 10,000 | |||||||
PSUs | 10,000 | |||||||||
Large Private Sector/IPPs | 5,000 | |||||||||
SECI | 5,000 | |||||||||
Under State Policies | 20,000 | |||||||||
Ongoing programmes incl. past achievements | 10,000 | |||||||||
Total |
40,000 | 60,000 |
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Source: India Ministry of New and Renewable Energy
Results of NSM Auctions | ||||||||||
Phase I Batch I | Phase I Batch II | Phase II Batch I | Phase II Batch II | Phase II Batch III | ||||||
Date |
August 2010 | August 2011 | December 2013 |
Expected to be
allocated over multiple tranches |
Expected to be
allocated over multiple tranches |
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Offtaker |
NTPC Vidyut
Vyapar Nigam Limited |
NTPC Vidyut
Vyapar Nigam Limited |
Solar Energy
Corporation of India Limited |
NTPC Vidyut
Vyapar Nigam Limited |
Solar Energy
Corporation of India Limited |
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Capacity Allotted (MW) |
150(1) | 350(1) | 750 | 15,000 | 2,000 | |||||
Capacity Commissioned (MW) |
140 | 310 | NA | NA | NA | |||||
Allocation Mechanism |
Reverse Tariff
Bidding |
Reverse Tariff
Bidding |
VGF |
Reverse Tariff
Bidding |
VGF | |||||
Reference Tariff ( Rs. / kWh ) |
17.9kWh | 15.4kWh | 5.45kWh | NA | 5.79kWh | |||||
Tariff Bid / VGF Requested (applicable for Ph ase II Batch I only) |
Rs. 12.16kWh | Rs. 8.77kWh | Rs. 15mn/MW | NA | NA | |||||
Number of Winning Bidders |
30 | 26 | 47 | NA | NA |
Note: | (1) Allotted capacity for which PPAs have been signed. |
VGF was set up by the Indian government to incentivize the development of a large number of solar power projects in India, whereby the ongoing monthly fixed tariff to be paid by the distribution companies purchasing the power would be minimized. Under the VGF scheme in Phase II Batch I, the tariff paid to solar power project developers is fixed at Rs. 5.45 per kilowatt hour during the 25-year PPA period. In return for the fixed tariff, the developer is provided VGF based on its bid for the VGF amount, with the upper limit being the lower of 30% of the project cost or Rs. 25 million per megawatt. The developer is entitled to 50% of the VGF upon the commissioning of the project and the balance is paid in five equal installments at the end of each year after the initial commissioning date.
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1,250MW of the targeted solar power was auctioned in the first three rounds of auctions. These auctions were highly successful and resulted in a gradual decline in tariffs. Through successive batches, the government has set the standards and has encouraged development of solar power generation in the country. In addition, the central government has recently released draft guidelines for the next few batches of Phase II bidding with NTPC Vidyut Vyapar Nigam Limited, or NVVN, and Solar Energy Corporation of India, both of which are expected to be the offtakers. These guidelines envision auctioning 3GW of capacity under tranche I of Phase II Batch II across the country by NVVN through March 2017. Through January 2016, the government has released tenders for tranche I of Batch II Phase II for an aggregate of 2,750MW through NVVN. The next two batches of 5GW and 7GW through NVVN are expected to be released between fiscal year 2016 to 2018 and fiscal year 2017 to 2019, respectively. Solar Energy Corporation of India, which is developing grid connected solar power capacity through VGF in the country, is expected to add further a total solar PV capacity of 2,000MW under the Phase II Batch III of the NSM in various tranches. At the end of January 2016, Solar Energy Corporation of India announced four tranches of bidding 500MW of solar capacity in Maharashtra, 250MW of solar capacity in Gujarat, 440MW of solar capacity in Uttar Pradesh and 500MW of solar capacity in Andra Pradesh. As of January 2016, Solar Energy Corporation of India has a tendering capacity of 2,773MW and Rooftop Solar has a tendering capacity of 1GW.
Apart from the auctions promoted by the central government, the state governments are also independently inviting bids for solar power tenders. In 2015, tenders have been released for more than 7.8GW of solar capacity by state governments. In April 2015, Telangana released a tender for 2GW of solar capacity. In January 2016, Madhya Pradesh completed bidding for 300MW of solar capacity, Uttar Pradesh bids for 215MW of solar capacity, Haryana for 150MW of solar capacity, Punjab for 500MW of solar capacity, Uttarakhand for 170MW of solar capacity, Karnataka for 500MW, Andra Pradesh for 500MW, Tamil Nadu for 1,284MW and Jharkhand for 1,200MW.
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Overview
Our mission is to be the lowest-cost power producer in the world. We sell solar power in India on long term fixed price contracts to our customers, at prices which in many cases are at or below prevailing alternatives for these customers. We are also developing micro-grid applications for the highly fragmented and underserved electricity market in India. Since inception, we have achieved a 73% reduction in total solar project cost, which includes a significant decrease in balance of systems costs due in part to our value engineering, design and procurement efforts.
Indian solar capacity installed reached 5GW at the end of December 2015 with a target to achieve 100GW of installed solar capacity by 2022. Solar power is a cleaner, faster-to-build and cost-effective alternative energy solution to coal and diesel based power, the economic and climate costs of which continue to increase every year.
We developed Indias first utility scale solar project in 2009. As of January 31, 2016, we operated 21 utility scale projects and several commercial rooftop projects with a combined rated capacity of 276MW which represents a compound annual growth rate, or CAGR, of 122% from May 2012. As of such date we were also constructing ten projects with a combined rated capacity of 214 MW and had an additional 314 MW committed, bringing our total portfolio capacity to 804MW. Megawatts committed represents the aggregate megawatt rated capacity of solar power plants pursuant to customer power purchase agreements, or PPAs, signed or allotted but not yet commissioned and operational as of the reporting date. We are targeting having 520MW operating by December 31, 2016. Our longer term goals are to achieve 1GW committed or operating by December 31, 2017 and 5GW by December 31, 2020. Our ability to achieve these goals will depend on, among other things, our ability to acquire the required land for the new capacity (on lease or direct purchase), raising adequate project financing and working capital, the growth of the Indian power market in line with current government targets, our ability to maintain our market share of Indias installed capacity as competition increases, the need to further strengthen our operations team to execute the increased capacity, and the need to further strengthen our systems and processes to manage the ensuing growth opportunities, as well as the other risks and challenges discussed under the caption Risk Factors.
Utility scale solar projects are typically awarded through government auctions. We believe we have secured more megawatts of capacity in these auctions in the last six years than any other company in India. We believe the strong demand for our solar power is a result of the following:
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Low levelized cost of energy . We have lowered our levelized cost of energy, which is a measure of comparing the cost of energy generated by different power generation technologies, through value engineering, operational performance monitoring and efficient financial strategy. This allows us to deliver cost-effective energy for our customers. From 2009 to January 31, 2016, the price at which we sell power to utilities fell by 73%. On a rooftop, we believe we are consistently below the cost of our customers alternative sources of power. Our in-house engineering, procurement and construction, or EPC, expertise lowers system costs through proprietary designs and a global equipment procurement process. Our purely solar focus coupled with our pan-India presence allows us to optimize our system designs for the Indian market. Our advanced in-house operations and maintenance, or O&M, capability allows us to increase power yields and monitor project performance near real-time. Coupled with our efficient financial strategy, we believe that we are able to offer low-cost solar power solutions at high efficiency yields. As we continue to grow, we expect to achieve further efficiencies of scale, allowing us to compete with conventional power sources on a levelized cost of energy basis. |
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Strong value proposition for our customers . We manage the entire development and operation process, providing customers with long term fixed price PPAs, as a result of solar not being subject to variable commodity prices. Our in-house focus on high engineering standards and asset quality ensures high levels of availability and service to our customers. We believe our pan-India presence and existing relationships with leading solar power purchasers help us win repeat business on long-term contracts. |
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Our integrated profile supports growth . As opposed to relying on third-party providers, our integrated profile affords us greater control over project development, construction and operation, which provides us with greater insight and certainty on our construction costs and timeline. Coupled with our low cost profile, our greater insight supports competitive new project bids at prevailing market prices, not at our direct costs. This facilitates a steady organic growth pipeline that allows us to earn enhanced project returns. |
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Strong community partnerships . We hire from local communities and generally lease land with few alternative uses, providing local communities with a stream of discretionary cash flow without displacing alternative businesses. As a result we are able to build long-term community relationships, which allows us to improve our time of completion, further reducing project development risk. |
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We take a leading role in policy initiatives . Our strong policy advocacy practice supports a sustainable and open market, contributing to success for all stakeholders including manufacturers, investors and customers. For example, we filed suggestions with government offtakers to set new auction guidelines and tariff orders. In addition, under the NSM, we have advocated the use of novel financing instruments, including bankable PPAs and compulsorily convertible debentures. Furthermore, we provided input to the government to help it design an auction process supporting multiple winners at differentiated price points and implementing a transparent bidding process open to participants regardless of their jurisdiction of incorporation, ownership of land or choice of technology. For example, we suggested that the government include compulsorily convertible debentures in the calculation of a bidders net worth for the purposes of tender qualification, which was ultimately adopted by the government. |
We operate in a large, rapidly growing market that suffered from a five-year average peak power deficit of approximately 8% from March 2010 through March 2015, according to the Ministry of Power. Coal-fired generation, Indias main power source, is increasingly reliant on expensive imports as the countrys demand outstrips domestic coal supply, leading to upward pressure on power prices. In contrast, Indian solar power offtake costs are near grid parity due to Indias leading solar irradiation and declining production costs. In 2010, the Indian government created the Jawaharlal Nehru National Solar Mission, or the NSM, to promote solar development and targeted 10GW of solar capacity by 2017. The current Prime Minister Modi-led government is also committed to spurring growth in the solar market and increased the government-sponsored solar procurement target to 100GW by 2022. Our goal is to grow in line with the broader Indian solar market by continuing to leverage our strengths.
We generate revenue from a mix of leading government utilities such as NTPC Vidyut Vyapar Nigam Limited, a subsidiary of NTPC Limited, and the Solar Energy Corporation of India as well as commercial entities such as Torrent Power Limited and DLF Limited. All our PPA customers pay a rate based on energy produced by our solar power plants. Some customers pay upfront capital to keep long term power cost lower than the market price of power. Because we have our own EPC and O&M capabilities, we retain the profit margins associated with those services that other project developers may need to pay to third-party providers. Through value engineering, operational performance monitoring and efficient financial strategy, we are able to deliver cost-effective energy for our customers. We intend to expand our footprint into states within India and internationally into developing electricity markets.
We are able to capture additional returns vis-à-vis EPC contractors and operators due to our local Indian development expertise and global access to capital. Additionally our integrated approach allows us to capture the full benefits of the project value chain, as opposed to transferring part of the value to a sponsor or project developer. Unlike in many jurisdictions, the bulk of the development capital in India is spent after the project has been awarded at auction and offtake arrangements and economic terms are known. To date, we have raised over US$780 million in various forms of equity and debt financings with established financial institutions such as the International Finance Corporation, the private investment arm of the World Bank Group, the Export-Import Bank of the United States, DEG Deutsche Investitionsund Entwicklungsgesellschaft mbH, or DEG, Société de Promotion et de Participation pour la Coopération Économique, or PROPARCO, Overseas Private Investment Corporation, Reliance Capital Limited, India Infrastructure Finance Company Limited and the Central Bank of India. Approximately US$56.6 million of the amount raised remains available for deployment.
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The cumulative effect of the cost savings and production improvements achieved is to accelerate grid parity between our projects and new build alternatives. While renewable subsidies exist, our low cost profile has allowed us to bid in auctions with greater certainty and enjoy higher project returns. When renewable subsidies end, we expect that our low cost profile will support our continued growth.
Market Opportunity
Indias economic growth is intrinsically linked to the increasing consumption of energy and natural resources. Energy demand has outpaced capacity additions in recent years, which has resulted in persistent peak power deficits in the country. Solar is an attractive option to help address this energy gap driven by regional fundamentals and regulatory support by the Indian government.
The following trends have made solar a large, rapidly growing market opportunity:
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Peak power deficits and rising power prices . Despite adding 112GW of power in the past five years through March 2015, India continues to be plagued by a persistent demand/supply mismatch with a five-year average energy deficit of approximately 7% and a five-year average peak deficit of approximately 8% through March 2015 according to the Ministry of Power. As the country has outstripped its domestic supply of conventional fuels, India has also suffered from upward pressure in power prices. |
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Strong regulatory support . In order to reduce dependence on energy imports and curtail the current trade deficit and resulting impact on the rupee, the Indian government has taken a number of steps to incentivize the use of renewable sources of energy. These include establishing state-level renewable power purchase obligations and providing viability gap funding, or VGF, to solar project developers to make solar tariffs competitive in the country. To provide further impetus to solar growth, the Indian government launched the NSM in 2010. |
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Solar positioned to win among alternatives . Solar generation is viable across most of India, unlike wind and hydro resources which are concentrated in specific regions. In addition, as solar plants can be built near the point of consumption, power produced generally does not incur expensive transmission charges or require infrastructure or transmission investments. Further, unlike nuclear and hydropower, solar power has fewer legal liabilities and environmental constraints. |
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Leading global solar resource . India ranks among the highest irradiation-receiving countries in the world with more than 300 days of sunshine per year in much of the country and the resource is widely available throughout the country. |
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Solar approaching parity . State utilities have seen power costs rise as domestic coal shortages have caused thermal generators to increasingly rely on more expensive imported fuels. An analysis of current tariffs in India indicates that solar power is now competitive with wind, new thermal capacity fueled by imported coal and grid power tariffs for commercial users. Further, diesel power, the most common replacement power source for commercial and off-grid users in the country, is far more expensive than solar power. Additionally, solar panel prices are expected to fall further, which in turn is expected to drive further reductions in solar tariffs. |
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Transparent solar auction process . Indian solar auctions are conducted in a transparent manner that ensures bids meet minimum technical and financial criteria. Bidders must meet requirements on project development and execution history in India or the regional market, including bidder experience in the development of similar utility scale power projects. Auctions are not winner-take-all; instead, they are constructed to ensure multiple high-quality developers are allotted portions of the total capacity block. |
These factors have increased the solar installation to approximately 5.2GW as of January 31, 2016, of which 4.2GW is operating under various state policies and the NSM. Approximately 7.8GW of tenders have been announced under various state policies. In addition, auctions allocating 4.3GW of projects are expected to be announced or completed under the NSM by the end of fiscal year 2017. The Indian government plans to accelerate the operation of renewable energy targeting 100GW of solar energy by 2022.
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Our Approach
We lower the levelized cost of energy through value engineering, operational performance monitoring and efficient financial strategy to deliver cost-effective energy for our customers. We sell energy to government utilities and independent industrial and commercial customers at predictable fixed prices. Since our energy generation does not rely on fossil fuels, our electricity prices are insulated from the volatility of commodity pricing. We also guarantee the electricity production of our solar power plants to our customers.
We offer integrated project development, EPC, financing, O&M services without involving multiple third-party services. This approach has allowed us to generate efficiencies of scale that further drive down system costs. A low cost structure allows us to bid for auctions strategically, which supports our high auction win rate and helps preserve our market leading position, which further reduces costs. As of January 2016, in the NSM auctions in which we have chosen to participate, we have won 300MW of the projects allocated.
Moreover, we believe that our brand recognition and procurement scale improves negotiating power with suppliers and lenders. As the first developer and operator of utility scale solar assets in India, we believe that we are a well-established brand that has grown alongside the burgeoning Indian solar market since 2009. We have proven to be a reliable developer that successfully and expediently executes on our development pipeline and wins repeat business. Our reputation and track record give us an advantage in the auction evaluation process, improving our win rate. As a result, we believe we have become one of the largest purely solar operators in the space, which affords us greater negotiating power with original equipment manufacturers and project finance lenders. This in turn improves our cost and capital structure, which benefits our bid win rate.
The key elements of our three-pronged approach are as follows:
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Value engineering . Our in-house EPC allows us to enhance our system design expertise with each successive project, be flexible with our choice of technology and source from top-tier suppliers that optimizes both the system cost and power yield of the total solar block. We are able to further negotiate pricing as we have built a well-recognized brand, strong supplier relationships and significant economies of scale. As a result of our value engineering, we have seen a significant reduction in balance of system costs. |
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Operational performance monitoring . As the operator of the first utility scale solar plant in India, we have been able to develop and improve on our operational expertise with each successive project to enhance output per watt. We have a patent pending for a tracking system that allows us to manually track the suns seasonality by adjusting module angles multiple times per year specific to the location, thus increasing the power yield at lower costs. Further, we operate a National Operating Control Center, or NOCC, that allows us to monitor project performance in real-time and allows us to respond rapidly to potential generation anomalies. Feedback from our operating projects also serves to further enhance our project designs, resulting in enhancements for current and new plants and further reductions to our levelized cost of energy. |
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Financial strategy . Our integrated business model also increases capital efficiency. We are able to offset project equity requirements through economic benefits generated by our EPC and O&M businesses. Coupled with our asset financing strategy we are able to optimize the overall cost of capital leading to enhanced economics for our customers and shareholders. To enable rapid operation of our projects, we use short term credit facilities that are refinanced with long term project finance facilities. Our strong track record and relationships with local banks offer us significant advantages over international bidders when it comes to posting capital for bids. On account of our strong track record and local banking relationships, we are able to post bid bond guarantees with a capital outlay from 10% to 20%, as opposed to 100% cash funded. |
Our Competitive Strengths
We believe we differentiate ourselves from the competition in a number of key ways.
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Market leadership . We have several market-leading advantages in the solar power industry in India. We have a first mover advantage from the construction of Indias first private utility scale solar photovoltaic power plant in 2009 as well as the implementation of the first megawatt scale rooftop smart city initiative in 2013. Additionally, our strong track record in policy and project development across utility scale, commercial rooftop and micro-grids projects enables us to have a market leading auction win rate of 75% for bids we participated in from 2010 to January 31, 2016, and has helped us gain a leading market share in India. |
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Scale and brand-name recognition . As the first developer and operator of utility scale solar assets in India, we believe that we are a well-established brand that has grown alongside the rapidly growing Indian solar market since 2009. We have proven to be a reliable developer with successful and expedient execution of our development pipeline, which has helped us win repeat business. Our reputation and track record provide us an advantage in the auction evaluation process, thereby improving our win rate. As a result, we believe we have become one of the largest solar developers and operators in India, which affords us greater negotiating power with our suppliers and project finance lenders. This in turn improves our overall cost and capital structure, which again benefits our win rate in the auction process. |
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In-house EPC and O&M expertise enable cost efficiencies . Our in-house EPC capabilities enhance our ability to be flexible with our choice of technology, which allows us to choose high quality equipment while optimizing the combination of total solar project cost and yield. Our in-house O&M capabilities maximize project yield and performance through proprietary system monitoring and adjustments. We have demonstrated a 73% decrease in total solar project costs since inception in part through continual innovation in our EPC and O&M capabilities. Coupled with improved efficiency of solar panels, we are able to offer cost-efficient solutions to all our customers, which allows us to bid more efficiently in renewable energy auctions and thereby improve our project returns. |
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Superior technical and execution capabilities . We continually seek to innovate our systems and processes in order to lower our levelized cost of energy. For example, we have developed proprietary systems that significantly reduce the time it takes to design, finance and commission projects. We have also improved our operational processes. For instance, we operate a NOCC system to provide high level of service to all our customers at minimal operating costs. We have developed a streamlined approach to construction that relies on small and efficient teams. Our lean and efficient execution expertise facilitates completion of our plants ahead of contracted completion dates, enables us to easily scale our operations without significant increases to headcount, and allows us to construct several projects in parallel without compromising on efficiency. |
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Long term, stable cash generation . We typically enter into 25-year, fixed price PPAs with government agencies and independent commercial businesses. As a result of generally reliable solar irradiation in India, our energy production under these PPAs has historically had little volatility, which, coupled with our low operating expenses, makes for predictable cash flows from these agreements. |
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Long term community support . We partner with local communities when we embark on a new project. We hire from local communities and generally lease land that has few alternative uses, providing local communities with a stream of discretionary cash flow without displacing alternative businesses. As a result we are able to build long term community relationships, which allows us to improve our time of completion, further reducing project development risk. Economic development also drives local power demand. |
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Strong management . Our strong management team has proven execution capabilities globally. Our senior leadership team consists of our founders, Inderpreet S. Wadhwa and Harkanwal S. Wadhwa, who are widely recognized experts in the Indian solar energy sector with track records of building successful businesses. Our board of directors also includes Robert Kelly, Barney Rush and Diane Farrell, who are well-respected global authorities in energy finance and public policy. |
Our Business Strategy
Key elements of our business strategy include the following.
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Continue to drive project cost reductions. Our mission is to be the lowest cost power producer in the world. Since inception, we have achieved a 73% reduction in total solar project cost, which includes a significant decrease in balance of systems costs due to our value engineering, design and procurement efforts. We will continue to reduce costs by leveraging our in-house EPC and O&M capabilities and by improving our negotiating power with technology providers and project lenders. We expect to further innovate our financing solutions to reduce the cost of energy for our customers and achieve grid parity with local alternatives in the utility market in the next few years. |
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Rapidly grow our project portfolio to achieve scale benefits. Since we built Indias first utility scale solar project in 2009, we have built and have committed to build 804MW of solar energy across 14 states and union territories in India as of January 31, 2016. We intend to rapidly grow our project portfolio, which will enable us to achieve further economies of scale. We have submitted bids for projects totaling an additional 480MW. We are targeting having 520MW operating by December 31, 2016. Our longer term goals are to achieve 1GW committed or operating by December 31, 2017 and 5GW by December 31, 2020. Our ability to achieve these goals will depend on, among other things, our ability to acquire the required land for the new capacity (on lease or direct purchase), raising adequate project financing and working capital, the growth of the Indian power market in line with current government targets, our ability to maintain our market share of Indias installed capacity as competition increases, the need to further strengthen our operations team to execute the increased capacity, and the need to further strengthen our systems and processes to manage the ensuing growth opportunities, as well as the other risks and challenges discussed under the caption Risk Factors. We plan to continue to expand our presence in new states in India and expand our business with existing customers to meet their clean energy needs through community-supported growth. We also plan to significantly expand our presence in commercial and micro-grid applications. In order to continue this growth, we plan to reinvest our operating cash flow into new project development and construction. |
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Maintain position as a top Indian solar company. We are the longest tenured solar power producer in India and we believe we have the largest portfolio of operating projects under the NSM and one of the largest portfolios of operating projects in India. By entering the market first and growing in line with the broader Indian solar opportunity, we have been able to develop a track record that is unmatched by competitors. As a result, we have developed critical operational expertise and regional knowledge that improves project performance and expedites project execution. Additionally, our purely solar model and pan-India presence should help us preserve our market leading position. |
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Leverage track record and management relationships to shape policy. We have petitioned governments at the local, state and central levels for substantial changes to solar policy that are essential to the advancement of the solar industry. For example, we filed suggestions with the Central Electricity |
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Regulatory Commission to set new guidelines and tariff orders for the sale and purchase of solar energy. In addition, under the NSM, we have advocated the use of financing instruments and transactions considered novel in the Indian solar sector, including bankable PPAs and compulsorily convertible debentures. This strategy is unique in the industry and will be critical both to our continued growth and to the development of the solar energy industry within India. We plan to leverage our track record, together with our managements long-running relationships with policy-makers, to influence policy at all governmental levels. |
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Expand into new locations. As of January 31, 2016, we had a presence in 14 of 36 states and union territories in India. Given the strength of the solar resource throughout India and our distribution model, we intend to operate in every state that has structural power needs. We participate in both national and state level renewable energy auctions. We intend to continue to expand our presence into other states in India and other emerging markets with underserved electricity markets. |
Research and Development
Our intellectual property is an essential element of our business, and our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of patent, trade secret, trademark and other intellectual property laws, confidentiality agreements and license agreements to establish and protect our intellectual property rights. As of January 31, 2016, we had three pending patent applications. These applications include our real time and pre-paid solar power module, which enables automated services such as solar energy generation and provisioning, maintenance and billing and our manual solar tracking system, which allows us to control remotely our solar panels to follow the movement of the sun.
Customers
The following chart shows the commercial operation date, capacity, tariff, offtaker and duration of PPAs for our projects as of January 31, 2016.
Operational | ||||||||||||||
Project Names |
Commercial
Operation Date(1) |
Capacity (MW) |
Tariff
(Rs/kWh) |
Offtaker |
Duration
of PPA in Years |
|||||||||
Punjab 1 |
Q4 2009 | 2 | 17.91 | NTPC Vidyut Vyapar Nigam | 25 | |||||||||
Punjab 2.1 |
Q3 2014 | 15 | 7.67 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 2.2 |
Q4 2014 | 15 | 7.97 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 2.3 |
Q4 2014 | 4 | 8.28 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 3.1 |
Q1 2016 | 24 | 7.19 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 3.2 |
Q1 2016 | 4 | 7.33 | Punjab State Power Corporation Limited | 25 | |||||||||
Gujarat 1.1 |
Q2 2011 | 5 | 15.00(3) | Gujarat Urja Vikas Nigam Limited | 25 | |||||||||
Gujarat 1.2 |
Q4 2011 | 5 | 15.00(3) | Gujarat Urja Vikas Nigam Limited | 25 | |||||||||
Rajasthan 1 |
Q4 2011 | 5 | 11.94 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
Rajasthan 2.1 |
Q1 2013 | 20 | 8.21 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
Rajasthan 2.2 |
Q1 2013 | 15 | 8.21 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
Rajasthan 3.1 |
Q2 2015 | 20 | 5.45 |
Solar Energy Corporation of India |
25 | |||||||||
Rajasthan 3.2 |
Q2 2015 | 40 | 5.45 |
Solar Energy Corporation of India |
25 | |||||||||
Rajasthan 3.3 |
Q2 2015 | 40 | 5.45 |
Solar Energy Corporation of India |
25 | |||||||||
Rajasthan 4 |
Q4 2015 | 5 | 5.45 | Solar Energy Corporation of India | 25 |
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Project Names |
Commercial
Operation Date(1) |
Capacity (MW) |
Tariff
(Rs/kWh) |
Offtaker |
Duration
of PPA in Years |
|||||||||
Karnataka 1 |
Q1 2015 | 10 | 7.47 |
Bangalore Electricity Supply Company Limited |
25 | |||||||||
Uttar Pradesh 1 |
Q1 2015 | 10 | 8.99 |
Uttar Pradesh Power Corporation Limited |
12 | |||||||||
Chhattisgarh 1.1 |
Q2 2015 | 10 | 6.44 |
Chhattisgarh State Power Distribution Company Limited |
25 | |||||||||
Chhattisgarh 1.2 |
Q2 2015 | 10 | 6.45 |
Chhattisgarh State Power Distribution Company Limited |
25 | |||||||||
Chhattisgarh 1.3 |
Q3 2015 | 10 | 6.46 |
Chhattisgarh State Power Distribution Company Limited |
25 | |||||||||
Delhi 1.1 |
Q4 2015 | 1 | 5.43 | Solar Energy Corporation of India | 25 | |||||||||
|
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Total Capacity |
270 | |||||||||||||
Under Construction | ||||||||||||||
Karnataka 2 |
Q1 2015 | 10 | 6.66 | Bangalore Electricity Supply Company Limited | 25 | |||||||||
Karnataka 3.1 |
Q3 2016 | 50 | 6.89 | Chamundeshwari Electricity Supply Corporation Limited | 25 | |||||||||
Karnataka 3.2 |
Q3 2016 | 40 | 6.93 | Hubli Electricity Supply Corporation Limited | 25 | |||||||||
Karnataka 3.3 |
Q3 2016 | 40 | 6.96 | Gulbarga Electricity Supply Corporation Limited | 25 | |||||||||
Andhra Pradesh 1(2) |
Q1 2016 | 50 | 5.89(3) | Southern Power Distribution Company of Andhra Pradesh Limited | 25 | |||||||||
Bihar 1 |
Q3 2016 | 10 | 8.39 | North Bihar Power Distribution Company Limited and South Bihar Power Distribution Company Limited | 25 | |||||||||
Delhi 1.2 |
Q1 2016 | 2 | 5.45 | Solar Energy Corporation of India | 25 | |||||||||
|
|
|||||||||||||
Total Capacity |
202 | |||||||||||||
Committed | ||||||||||||||
Punjab 4.1 |
Q1 2017 |
50 | 5.62 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 4.2 |
Q1 2017 |
50 | 5.63 | Punjab State Power Corporation Limited | 25 | |||||||||
Punjab 4.3 |
Q1 2017 |
50 | 5.64 | Punjab State Power Corporation Limited | 25 | |||||||||
Andhra Pradesh 2 |
Q1 2017 | 100 | 5.12 | NTPC VidyutVyapar Nigam Limited | 25 | |||||||||
Uttar Pradesh 2 |
Q1 2017 | 50 | 4.78 | NTPC Vidyut Vyapar Nigam Limited | 25 | |||||||||
|
|
|||||||||||||
Total Capacity |
300 | |||||||||||||
Commercial Rooftop |
||||||||||||||
Commissioned | ||||||||||||||
Gujarat Rooftops |
2013 | 2.5 | Torrent Power Limited | 25 | ||||||||||
DLF (total) |
2013-2015 | 1.46 | (4) | DLF Limited | 25 | |||||||||
Uttar Pradesh Rooftop 1 |
Q1 2015 | 0.555 | Indosolar Limited | 25 |
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Notes:
(1) | Refers to the applicable quarter of the calendar year. There can be no assurance that our projects under construction and our committed projects will be completed on time or at all. See Risk Factors Our construction activities may be subject to cost overruns or delays. |
(2) | Hanwha Q Cells Korea holds a minority interest against its investment of Rs. 316.9 million. |
(3) | Current tariff, subject to escalation, as disclosed under BusinessPortfolio of Solar Energy ProjectsOperational Projects. |
(4) | PPAs for 2.246MW are signed. 1.46MW of the project has commenced operations. |
(5) | 0.0529MW of the project has commenced operations. |
We have signed long term PPAs with central and state-run utilities, government-backed corporations and commercial users. As of January 31, 2016, our offtakers included:
Government
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NTPC Vidyut Vyapar Nigam Limited a government company that is a 100% owned subsidiary of NTPC Limited, the leader in power generation in India. NTPC Vidyut Vyapar Nigam Limited was designated under the NSM to be the agency responsible for procuring solar power by entering into PPAs with project developers |
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Gujarat Urja Vikas Nigam Limited a state-run utility |
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Punjab State Power Corporation Limited a state-run utility |
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Uttar Pradesh Power Corporation Limited a state-run utility |
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Bangalore Electricity Supply Company Limited a state-run utility |
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Solar Energy Corporation of India a not-for-profit company established under the administrative control of the Indian Ministry of New and Renewable Energy, or the MNRE, and an agency responsible for facilitating implementation of the NSM |
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Chamundeshwari Electricity Supply Corporation Limited a state-run utility |
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Hubli Electricity Supply Corporation Limited a state-run utility |
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Gulbarga Electricity Supply Corporation Limited a state-run utility |
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Southern Power Distribution Company of Andhra Pradesh Limited a state-run utility |
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North Bihar Power Distribution Company Limited and South Bihar Power Distribution Company Limited state-run utilities |
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Chhattisgarh State Power Distribution Company Limited a state-run utility |
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Indraprastha Power Generation Company Limited a state-run utility |
Commercial
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Torrent Power Limited a large Indian power generator and distributor |
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DLF Limited one of the largest residential, commercial and retail property developers in India |
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BSES Rajdhani Power Limited and BSES Yamuna Power Limited a large Indian power distributor |
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Delhi Gymkhana Club Limited one of Indias oldest clubs |
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Taj Sats Air Catering Limited a joint venture of Indian Hotels Company, which is an affiliate of the Tata Group, a global enterprise headquartered in India, and SATS Limited |
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Indosolar Limited leading Indian manufacturer of solar photovoltaic cells |
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The Oberoi Group a global premium chains of hotels, headquartered in Delhi |
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JCBL Limited a conglomerate with diversified solutions in automobile, pharmaceutical, design, information technology, hand tools, automobile parts and international business |
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Trident a premium hotel chain in India |
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Delhi Metro Rail Corporation a state public sector transportation company that operates the Delhi Metro |
Illustrative Projects
Punjab 1 Project
The Punjab 1 project was a 2MW plant in Awan Village, Amritsar district, that became operational in 2009. This was Indias first private megawatt capacity solar power project. We entered into a 25-year PPA with NTPC Vidyut Vyapar Nigam Limited with a tariff of Rs. 17.91 per kilowatt hour. NTPC Vidyut Vyapar Nigam Limited was mandated under the NSM to procure solar power to help distribution companies meet their solar renewable purchase obligations competitively. NTPC Vidyut Vyapar Nigam Limited bundles solar power with coal power to reduce the cost to the distribution companies. Consistent with our inclusive growth model, this project was built on community leased land.
Rajasthan Projects
The first Rajasthan project for 5MW was signed with NTPC Vidyut Vyapar Nigam Limited at a tariff of Rs. 11.94 per kilowatt hour for 25 years. The project was financed with a loan of US$15.78 million for a tenure of approximately 16.5 years.
The second Rajasthan portfolio, comprised of two projects for a total of 35MW, was signed at a tariff of Rs. 8.21 per kilowatt hour for 25 years.
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The abovementioned Rajasthan projects were built on a barren government desert in the western state of Rajasthan, land that has few alternative uses. These are a part of three projects totaling 40MW with over 400,000 solar panels. The lease rentals from the project create a revenue source for the government while meeting its clean energy mandate.
The third Rajasthan portfolio is comprised of three projects with a total capacity of 100MW. Each project PPA was won under NSM auctions with a VGF component. We were able to secure a total VGF of Rs. 1,860 million for these projects, which was the highest allotment of total available VGF. The PPA offtaker is the Solar Energy Corporation of India at a tariff of Rs. 5.45 per kilowatt hour. The projects were constructed for a total gross project cost of Rs. 7,301 million. Spread across over 717 acres of land in Jodhpur, these projects commenced operations in May 2015, making Azure the largest owner and operator of NSM projects totalling 142MW.
Modules for a total of 60MW have been completely manufactured in India, which is a significant milestone in supporting the Indian governments Make in India initiative in the solar power sector.
Chhattisgarh Projects
Chhattisgarh 1 is a 30MW project representing a portfolio of three projects of 10MW each under the Chhattisgarh Solar Policy, 2012-2017. Each of the three PPAs for the project were signed with Chhattisgarh State Power Distribution Company Limited for a tenure of 25 years with a tariff of Rs. 6.45 per kilowatt hour. The projects commenced operations between May 2015 and August 2015. The development and construction of the project was financed with a loan of Rs. 1,601 million for a tenure of 14 years. Debt comprised 75% of the project cost.
Gandhinagar Smart City Rooftop Project
We operate Indias largest and first distributed rooftop solar city program in the western capital city of Gandhinagar, Gujarat. A 25-year PPA for 2.5MW was entered into with the citys private distribution company, Torrent Power Limited. We signed up 161 residential and 31 government buildings on long term leases, putting up 2.5MW total capacity of solar in the city.
We provide solar powered electricity directly to the consumers and the building owners receive a revenue share from the energy generated on their roofs. This business model allows seamless collaboration between various stakeholders: policy makers, regulators, individual rooftop owners and utilities, who are able to meet their renewable purchase obligations by procuring solar power. World Bank recognized the project as one of the Top 10 public-private partnerships of 2013 in the Asia Pacific region. We believe that with strong policy support and decreasing solar power tariff, this model can help increase the reach of solar power to consumers and convert cities into power generation hubs. In the long term, this helps remove the need for capital subsidies and reduces long term electricity cost.
This project was financed with a loan of Rs. 143.74 million for a tenure of 15 years. Debt comprised 69% of the project cost.
Micro-Grids in Bihar and Uttar Pradesh
We are working on building microgrid projects in several unelectrified clusters in several states. We plan to take part in state and federal tendered bids. These bids are typically for 100 to 200kW central generating stations with storage and basic household lighting packages for providing electricity 10 to 12 hours per day at a fixed monthly rate per household.
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Competition
We believe our primary competitors are other solar developers such as SunEdison, Inc., First Solar, Inc. and ACME Cleantech Solutions Private Limited. Competition to acquire new projects occurs at the development stage as we bid for long term PPAs in central and state solar power auctions. We compete with other solar developers based on a number of factors, including the sourcing of solar projects, reputation and track record, relationship with government authorities, access to capital and control over quality, access to project land, efficiency and reliability in project development. Based on these factors, we believe that we compete favorably with our competitors in the regions we service.
We also compete with utilities generating power from conventional fossil fuels. Utilities generating conventional energy face rising costs as the constraints on domestic fuel supply continue and these energy sources do not benefit from various governmental incentives available to renewable energy producers. As we reduce our levelized cost and achieve parity with conventional energy suppliers, we expect to compete favorably with these suppliers on the basis of cost and reliability.
However, we cannot guarantee that some of our competitors do not or will not have advantages over us in terms of larger size, internal access to solar panels and greater operational, financial, technical, management, lower cost of capital or other resources. See Risk Factors Risks Related to Our Business and Industry We face significant competition from traditional and renewable energy companies.
Employees
As of January 31, 2016, we had 327 full time employees. We consider our relations with our employees to be amicable. The following table sets forth the number of our employees for each of the major functions as of January 31, 2016:
Number of
Employees |
||||
Project Development |
31 | |||
EPC |
125 | |||
O&M |
58 | |||
Management and Administrative |
113 | |||
|
|
|||
Total |
327 | |||
|
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Facilities
Our principal executive offices are located at 8, 17, 18, 19 and 20 Local Shopping Complex, Pushp Vihar, Madangir, New Delhi 110062, India, which occupies approximately 20,410 square feet of space. Our power projects are located primarily on land leased from the state governments and third parties and freehold land purchased by us from private individuals and entities.
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The following table sets forth the details of our tangible fixed assets associated with our utility scale power projects as of January 31, 2016.
Projects |
Productive
Capacity (MW) |
Size
(Acres) |
Ownership(1) | Location | ||||||||||||
Punjab 1 |
2 | 12 | Leasehold | Punjab | ||||||||||||
Gujarat 1 |
10 | 59.7 | Freehold | Gujarat | ||||||||||||
Rajasthan 1 |
5 | 43 | Leasehold | Rajasthan | ||||||||||||
Rajasthan 2 |
35 | 302 | Leasehold | Rajasthan | ||||||||||||
Punjab 2 |
34 | 181 | Leasehold | Punjab | ||||||||||||
Uttar Pradesh 1 |
10 | 56 | Freehold | Uttar Pradesh | ||||||||||||
Karnataka 1 |
10 | 45 | Freehold | Karnataka | ||||||||||||
Rajasthan 3 |
100 | 717 | Leasehold | Rajasthan | ||||||||||||
Chhattisgarh 1 |
30 | 150.05 | Freehold | Chhattisgarh | ||||||||||||
Karnataka 2 |
10 | 50.05 | Freehold | Karnataka | ||||||||||||
Punjab 3 |
28 | 147.3 | Leasehold | Punjab | ||||||||||||
Rajasthan 4 |
5 | 25 | Leasehold | Rajasthan | ||||||||||||
Karnataka 3 |
130 | 668.2 | Freehold | Karnataka | ||||||||||||
Andhra Pradesh 1 |
50 | 211.34 | Freehold | Andhra Pradesh | ||||||||||||
Bihar 1 |
10 | 56.3 | Freehold | Bihar | ||||||||||||
Delhi 1 |
3 | 17 | Leasehold | Delhi |
(1) | Our leasehold land is typically leased for 30 to 35 years, but our PPAs are generally for a term of 25 years. |
We believe that our facilities are in good condition and generally suitable and adequate for our needs in the foreseeable future. However, we will continue to seek additional space as needed to satisfy our growth.
Project Development
We participate in central- and state-level renewable energy auctions to build our utility scale portfolio. Our track record and size ensure we are able to participate in all auctions. Our in-house EPC and O&M capabilities and our pan-India presence provide us with greater visibility into competitive metrics, which allows us to bid strategically to maintain a high win rate while preserving good project economics.
The major stages of project sourcing, development and operation:
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Bidding. We have a well-organized process to effectively track all the policies and bid updates in the market. Once a tender is tracked, relevant information sourced from the request for proposal document |
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is discussed with the finance and technical teams and approved by the relevant committees before a strategic decision is made to participate in the bid. We also have an in-house project development information database which help us predict and bid the most effective tariff in the market. Once the bid is won, a letter of intent is issued and all the departments initiate their activities. Afterwards, the PPA is signed, which reflects the commercial operation date before which a plant should be commissioned. |
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Land acquisition. Generally once the letter of intent is received, we obtain the relevant land permits depending on whether the land is government-owned or private. When the land is privately owned, we identify the appropriate parcels of land and due diligence is conducted by a local legal counsel. We also undertake certain compliance measures, including technical diligence, soil testing, local advertisement, stakeholder consultation and land registration after which acquisition is complete. When the land is government-owned, we identify the suitable parcels of land from the responsible agency and obtain approval from the relevant authority. |
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Financing. The projects are generally financed with 75:25 debt-to-equity ratio. To enable rapid operation of our projects, we use short term credit facilities that are refinanced with long term project finance facilities. We invest equity from internal accruals and new financings to help growth and lower financing costs. |
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Material Delivery and Installation. Our procurement and construction teams work very closely to construct and deliver the plant in the most efficient manner. A detailed project plan is made and the progress tracker on the delivery and construction is reviewed very closely. Accordingly, we have consistently commissioned our projects before the commercial operation date. |
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Monitoring and Maintenance. Our operations team monitors performance of all the projects near real time from the NOCC, which allow us to respond rapidly to potential generation anomalies. They also perform scheduled preventive maintenance tasks on daily, weekly, monthly, and annual intervals to ensure our plants run smoothly and at high efficiency. |
Suppliers and Service Providers
We purchase major components such as solar panels and inverters directly from multiple manufacturers. There are several suppliers in the market and we select our suppliers based on expected cost, reliability, warranty coverage, ease of installation and other ancillary costs. As of the date of this prospectus, our primary solar panel suppliers were First Solar FE Holdings PTE Ltd. and Waaree Energies Pvt. Ltd., and our primary inverter suppliers were SMA Solar Technology AG, Schneider Electric India Pvt. Ltd., and Bonfiglioli Renewable Power Conversion India Pvt Ltd. We also source copper cables from General Cable Corporation and solar mounting structures from Unirac, Inc. We also engage the engineering services of Lahmeyer Group, Black & Veatch and Fichtner Consulting Engineers. We typically enter into master contractual arrangements with our major suppliers that define the general terms and conditions of our purchases, including warranties, product specifications, indemnities, delivery and other customary terms. We normally purchase solar panels and the balance of system components on an as-needed basis from our suppliers at then-prevailing prices pursuant to purchase orders issued under our master contractual arrangements. We generally do not have any supplier arrangements that contain long-term pricing or volume commitments, although at times in the past we have made limited purchase commitments to ensure sufficient supply of components. The prices of components for our solar power plants have declined over time as the manufacturers have lowered their cost of production, although the pace of this decline has been slowing recently. We have placed over $300 million in supplier purchases to date.
In addition, in April 2010, we entered into an agreement with SunEdison Energy India Private Limited, or SunEdison, whereby upon the satisfaction of certain conditions, SunEdison would provide monitoring technologies and hardware at cost to 25MW of our utility scale projects in India. The Company has entered into a strategic agreement in which Hanwha Q Cells Korea Corporation has invested INR 316.9 million in Andhra Pradesh 1 project. We have entered into a master supply agreement with First Solar FE Holdings Pte. Limited for
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190 MW offering preferential payments terms and supply credit for up to two years from supply date. Furthermore, we source lender technical due diligence and supplier third party certification from Lahmeyer International (India) Private Limited.
Portfolio of Solar Energy Projects
We have strategically focused on developing a pan-India portfolio of solar assets contracted under 12 to 25 year PPAs. As of January 31, 2016, we operated 21 utility scale projects and several commercial rooftop projects with a combined rated capacity of 276MW. As of such date, we were also constructing ten projects with a combined rated capacity of 214MW and had an additional 314MW of projects committed, bringing our total portfolio capacity to 804MW. Under our PPAs, we set up our solar energy plants either at our customer premises or in close proximity to the grid interconnection point. Generally the distance from our power plant to the grid interconnection point ranges from five to 20 kilometers.
Operational Projects
State of Punjab
Punjab 1 is a 2MW project that was constructed over a period of nine months. Punjab 1 was commissioned in 2009 and was migrated under Phase I Batch II of the NSM. The offtaker for the project is NTPC Vidyut Vyapar Nigam Limited, with a tariff of Rs. 17.91 per kilowatt hour for a period of 25 years, effective as of the execution of the PPA in October 2010. This was also the first utility scale solar project built in India, making us the longest operating solar company in India.
Punjab 2 represents a portfolio of three projects. Punjab 2.1 is a 15MW project that commenced commercial operations in September 2014. The PPA was signed in December 2013 with Punjab State Power Corporation Limited at a tariff rate of Rs. 7.67 per kilowatt hour for 25 years. The PPAs for Punjab 2.2 for 15MW and Punjab 2.3 for 4MW were signed in December 2013 with Punjab State Power Corporation Limited at tariff rates of Rs.7.97 (15MW) and Rs. 8.28 (4MW) per kilowatt hour, respectively, for 25 years. Both of the projects commenced operations in October 2014.
Punjab 3 represents a portfolio of two projects, Punjab 3.1 and Punjab 3.2, with capacities of 24MW and 4MW, respectively. PPAs for both projects were signed with Punjab State Power Corporation Limited in March 2015 with a tariff of Rs. 7.19 per kilowatt hour for Punjab 3.1 and Rs. 7.33 per kilowatt hour for Punjab 3.2. The term of each PPA is 25 years and the projects commenced operations in January 2016.
State of Gujarat
Gujarat 1 is a 10MW project under the Gujarat Solar Policy 2009. We entered into a PPA with Gujarat Urja Vikas Nigam Limited in April 2010 for a period of 25 years at a tariff rate of Rs. 15 per kilowatt hour for the first 12 years and Rs. 5 per kilowatt hour for the remainder of the term of the contract. The project was constructed in two phases.
Gujarat 1.1 was constructed over a period of nine months and is a 5MW project that commenced commercial operations in June 2011. Gujarat 1.2 was constructed over a period of 13 months and is a 5MW project that commenced operations in November 2011. On commissioning, this was the largest solar power plant in the country and is spread across Khadoda and Sinhol villages in the Sabarkatha District.
State of Rajasthan
Under the NSM, we have entered into multiple 25-year PPAs with NTPC Vidyut Vyapar Nigam Limited.
Rajasthan 1 is a 5MW project that was constructed over a period of nine months. The project was commissioned in December 2011. The PPA was signed in January 2011 with NTPC Vidyut Vyapar Nigam Limited with a tariff of Rs. 11.94 per kilowatt hour for a period of 25 years.
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Rajasthan 2 represents a portfolio of two projects that was constructed over 11 months. The two PPAs for Rajasthan 2.1 and Rajasthan 2.2 were signed in January 2012 with NTPC Vidyut Vyapar Nigam Limited, each with a tariff of Rs. 8.21 per kilowatt hour for a period of 25 years. Rajasthan 2.1 is a 20MW project that commenced commercial operations in the first quarter of 2013. Rajasthan 2.2 is a 15MW project that commenced operations in the first quarter of 2013.
Rajasthan 3 represents a portfolio of three projects with a total of 100MW under Phase II Batch I of the NSM. It is comprised of Rajasthan 3.1 of 20MW, Rajasthan 3.2 of 40MW and Rajasthan 3.3 of 40MW. PPAs for each of the three projects were signed with the Solar Energy Corporation of India in March 2014 for a period of 25 years at a tariff of Rs. 5.45 per kilowatt hour with VGF. This was one of the largest portfolios won under the policy with a total VGF amount of Rs. 1,860 million, which is the highest allotment of the total available VGF. Spread across over 717 acres of land in Jodhpur, these projects commenced operations in May 2015, making Azure the largest owner and operator of NSM projects totalling 142MW.
Rajasthan 4 is a 5MW project, for which the PPA was signed with Solar Energy Corporation of India in February 2015. The PPA was signed with Solar Energy Corporation of India for a tenure of 25 years with a tariff of Rs. 5.45 per kilowatt hour and VGF of Rs. 64.5 million for the total capacity of 5MW. The project commenced operations in November 2015.
Modules for a total of 60MW have been completely manufactured in India, which is a significant milestone in supporting the Indian governments Make in India initiative in the solar power sector.
State of Karnataka
Karnataka 1 is a 10MW project, for which the PPA was signed with Bangalore Electricity Supply Company Limited in January 2014 with a tariff of Rs. 7.47 per kilowatt hour for 25 years. The project commenced operations in January 2015.
State of Uttar Pradesh
Uttar Pradesh 1 is a 10MW project, for which the PPA was signed in December 2013 with Uttar Pradesh Power Corporation Limited with a tariff rate of Rs. 8.99 per kilowatt hour for 12 years. The project commenced operations in January 2015.
State of Chhattisgarh
Chhattisgarh 1 is a 30MW project representing a portfolio of three projects of 10MW each under the Chhattisgarh Solar Policy, 2012-2017. Each of the three PPAs for the project were signed with Chhattisgarh State Power Distribution Company Limited for a tenure of 25 years at tariff rates of Rs. 6.44, Rs. 6.45 and Rs. 6.46 per kilowatt hour, respectively, for a period 25 years. The projects commenced operations between May 2015 and August 2015.
State of Delhi
Delhi 1 is a 3MW project for which the letter of intent was received from Solar Energy Corporation of India with a tariff of Rs. 5.43 per kilowatt hour and VGF of Rs. 13.7 million for a period 25 years. This is a two phase project. The first phase for 1MW (Delhi 1.1) commenced operation in October 2015 and the second phase for 2MW (Delhi 1.2) is expected to commence operations in the first quarter of 2016.
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Under Construction Projects
State of Karnataka
Karnataka 2 is a 10MW project under the Karnataka Solar Policy, 2014-2021. The PPA was signed with Bangalore Electricity Supply Company Ltd. in September 2014 at a tariff of Rs. 6.66 per kilowatt hour for 25 years. This project is expected to commence operations by the first quarter of 2016.
Karnataka 3 is a 130MW project, under the Karnataka Solar Policy, 2014-2021. This project represented a 26% win of the auction for a total of 500MW. The project is divided in three sub-projects.
Karnataka 3.1 is a 50MW project. The PPA for the project was signed in January 2015 with Chamundeshwari Electricity Supply Corporation Limited at a tariff rate of Rs. 6.89 per kilowatt hour for 25 years. This project is expected to commence operations by the third quarter of 2016.
Karnataka 3.2 is a 40MW project. The PPA for this project was signed with Hubli Electricity Supply Company Limited in January 2015 at a tariff rate of Rs. 6.93 per kilowatt hour for 25 years. This project is expected to commence operations by the third quarter of 2016.
Karnataka 3.3 is a 40MW project. The PPA for this project was signed by Gulbarga Electricity Supply Company Limited in January 2015 at a tariff rate of Rs. 6.96 per kilowatt hour for 25 years. This project is expected to commence operations by the third quarter of 2016.
State of Bihar
Bihar 1 is a 10MW project, for which the PPA was signed with North Bihar State Power Distribution Company Limited, or NBPDCL, and South Bihar Power Distribution Company Limited, or SBPDCL, in January 2015 at a tariff of Rs. 8.39 per kilowatt hour for 25 years. Per the terms of the PPA, the PPA and relevant project documents are to be assigned to either NBPDCL or SBPDCL at a later date depending on the final location of the project. The project is expected to commence operations by the third quarter of 2016.
State of Andhra Pradesh
Andhra Pradesh 1 is a 50MW project. The PPA was signed with Southern Power Distribution Company of Andhra Pradesh Limited in December 2014 with a tariff of Rs. 5.89 per kilowatt hour for one year, increasing by 3% per annum from years two to ten and thereafter at the same tariff as that in year ten for the remainder of the 25-year term. This project is expected to commence operations by the first quarter of 2016.
Committed Projects
State of Punjab
Punjab 4 represents a 150MW project, representing a portfolio of three projects of 50MW each, for which PPA will be signed with Punjab State Power Corporation Limited at a weighted average tariff of Rs 5.63 per kilowatt hour. The project is expected to commence operations within 12 months after the signing of the PPA.
State of Andhra Pradesh
Andhra Pradesh 2 is a 100MW project for which the PPA will be signed with NTPC Limited with a tariff of Rs 5.12 per kilowatt hour and the letter of intent for the project indicates a project period of 25 years. The project is expected to commence operations within 13 months after the signing of the PPA.
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State of Uttar Pradesh
Uttar Pradesh 2 is a 50MW project for which the PPA will be signed with NTPC Limited with a tariff of Rs 4.78 per kilowatt hour. The project is expected to commence operations within 13 months after the signing of the PPA.
Portfolio of Rooftop Projects
As of January 31, 2016 we had a total of 28MW of distributed rooftop solar capacity across ten states at various stages of operation. We manage over 200 rooftop sites with a further over 300 sites under development. The business model is similar to the ground-mount projects, where we enter into PPAs with various power distributor agencies or private, government or commercial users directly for 12 to 25 years at an agreed tariff for the period. The tariff rate ranges from Rs. 5.55 to Rs. 11.21 per kilowatt hour.
Operational
Gujarat Rooftop Project
The Gujarat Rooftop 1 project is a 2.5MW rooftop project that commenced operations in April 2013. We were the first and largest distributed solar rooftop project operational in the country. The PPA was signed with Torrent Power Limited, a leading brand in the Indian power sector for a period of 25 years. The project was recognized by the World Bank as one of the Top 10 public-private partnerships of 2013 in the Asia Pacific region.
DLF Rooftop Project
The DLF project is a 2.246MW rooftop project distributed on the rooftops across five states: Tamil Nadu (0.467MW), Telengana (0.519MW), West Bengal (two sites of 0.035MW and 0.121MW, respectively, of which 0.149MW is operational), Uttar Pradesh (0.368MW, of which 0.040MW is operational), Delhi (0.040MW), Chhattisgarh (0.45MW, yet to be commissioned) and Haryana (0.246MW). DLF Utilities Limited is a residential, commercial and retail property developer. A total of 14 PPAs were signed with DLF Utilities Limited in between June and March 2015 for 25 years.
Uttar Pradesh Rooftop Project
The Uttar Pradesh rooftop project is a 0.555MW project in the state of Uttar Pradesh. The PPA was signed with Indosolar Limited, an Indian manufacturer of solar photovoltaic cells, in July 2014 for a period of 25 years. The project commenced operations in March 2015.
Delhi Rooftop Project
The Delhi rooftop 1 project is a 0.056MW project in Delhi. The PPA was signed in December 2014 with Delhi Gymkhana Club Limited, one of Indias oldest clubs, for a period of 25 years. The project commenced operations in April 2015.
The Delhi rooftop 2 project is a 0.178MW project in Delhi. The PPA was signed with Taj Sats Air Catering Limited in April 2014 for a period of 20 years. Taj Sats Air Catering Limited is a joint venture of Indian Hotels Company, which is an affiliate of the Tata Group, a global enterprise headquartered in India, and SATS Limited, an entity formerly known as Singapore Airport Terminal Services. The project commenced operations in June 2015.
Punjab Rooftop Project
The Punjab rooftop 1 project is a 1MW project in the industrial city of Ludhiana. The PPA for this project was signed in May 2015 with JCBL Ltd. for a period of 25 years. The project commenced operations in July 2015.
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Under Construction
Punjab Rooftop Project
The Punjab rooftop 2 project is a 10MW project. The PPA was signed with Punjab State Power Corporation Limited. in March 2015 for a period of 25 years. The project is expected to commence operations by the first quarter of 2016.
Oberoi Rooftop Project
The Oberoi rooftop project is a portfolio of five rooftop projects with a total of 1.030MW, spread across three states: Haryana (0.636MW), Uttar Pradesh (0.161MW, of which 0.053MW is operational) and Rajasthan (0.259MW). The PPA for each project was signed in May 2015 for a period of 15 years with the affiliated entities of Oberoi Hotels and Resorts, a part of the Oberoi Group. The Oberoi Group also manages hotels under the brand Trident.
Delhi Rooftop Project
The Delhi rooftop 3 project is a portfolio of several rooftop projects with a total capacity of 1MW in Delhi. The tender was called by Indraprastha Power Generation Co. Ltd. (IPGCL) and the letter of intent for the project indicates a project period of 25 years.
Committed
Delhi Rooftop Project
The Delhi rooftop 4 project is a portfolio of several rooftop projects with a total capacity of 10MW in Delhi. The tender was called by Delhi Metro Rail Corporation Limited and the letter of intent for the project indicates a project period of 25 years.
Odisha Rooftop 1
The Odisha Rooftop 1 project is a portfolio of several rooftop projects with a total capacity of 4MW in Odisha. The tender was called by Green Energy Development Corporation of Odisha with a project period of 25 years.
Legal Proceedings
We are currently involved in and may from time to time, become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently party to any legal proceedings that, in the opinion of our management, would reasonably be expected to have a material adverse effect on our business, financial condition, operating results or cash flows if determined adversely to us. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Government Regulations
The Electricity Act, 2003
The Electricity Act, 2003, or Electricity Act, regulates and governs the generation, transmission, distribution, trading and use of electricity in India. Under the Electricity Act, the transmission, distribution and trade of electricity are regulated activities that require licenses from the relevant electricity regulatory commission (Central Electricity Regulatory Commission), State Electricity Regulatory Commissions, or SERCs, or the joint commission (constituted by an agreement entered into by two or more state governments or the central government in relation to one or more state governments, as the case may be).
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In terms of the Electricity Act, any generating company may establish, operate and maintain generating stations without obtaining a license if it complies with prescribed technical standards relating to grid connectivity. The generating company is required to establish, operate and maintain generating stations, tie-lines, sub-stations and dedicated transmission lines.
Further, the generating company may supply electricity to any licensee or even directly to consumers, subject to availing open access to the transmission and distribution systems and payment of transmission charges, including wheeling charges and open access charges, as may be determined by the relevant electricity regulatory commission. In terms of the Electricity Act, open access means the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system, by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the relevant electricity regulatory commission.
The relevant electricity regulatory commission is empowered to, among other things, determine or adopt the tariff for supply of electricity from the generating company to a distribution licensee (such as the distribution utility companies), for transmission of electricity, wheeling of electricity and retail sale of electricity. However, the relevant electricity regulatory commission may, in case of shortage of supply of electricity, fix the minimum and maximum tariffs for sale or purchase of electricity under agreements between a generating company and a licensee or between licensees, for a period not exceeding one year, to ensure reasonable prices of electricity. While determining the tariff, commissions are required to be guided by, among others, the promotion of co-generation and generation of electricity from renewable sources of energy.
Under the Electricity Act, certain offences including the theft of electricity, electric lines and materials, interference with meters or works of a licensee, the negligent waste of electricity and non-compliance of orders or directions attract monetary penalties ranging from Rs. 0.01 million to Rs. 0.1 million and imprisonment for periods ranging from three months to three years. Additionally, non-compliance with orders of the Regional Load Dispatch Centre and State Load Dispatch Centre may result in penalties of up to Rs. 15 million.
Further, the Electricity Rules, 2005, or the Electricity Rules, also prescribe a regulatory framework for developing captive generating plants. Pursuant to the Electricity Rules, a power plant shall qualify as a captive power plant only if not less than 26% of the ownership is held by captive users and not less than 51% of the aggregate electricity generated in such plant, determined on an annual basis, is consumed for captive use. Further, in case of association of persons, the captive users are required to hold not less than 26% of the ownership of the plant in aggregate and consume not less than 51% of the electricity generated, determined on an annual basis, in proportion to their share ownership in the power plant within a variation not exceeding 10%.
In case of a generating station owned by a company formed as a special purpose vehicle, the electricity required to be consumed by captive users is to be determined with reference to such unit or units identified for captive use and not with reference to the generating station as a whole and equity shares to be held by the captive users must not be less than 26% of the proportionate equity interest of the company related to the generating unit or units identified as the captive generating plant.
The Electricity (Amendment) Bill, 2014 was introduced in the lower house of the Indian Parliament to amend certain provisions of the Electricity Act. Among others, the amendment empowers the Indian government to establish and review a national renewable energy policy, tariff policy and electricity policy. Further, the Indian government may, in consultation with the state governments, notify policies and adopt measures for promotion of renewable energy generation including through tax rebates, generation linked incentive, creation of national renewable energy fund, development of renewable industry and for effective implementation and enforcement of such measures.
The generating company is also required to ensure compliance with certain other regulations, including the Central Electricity Authority (Safety Requirements for Construction, Operation and Maintenance of Electrical Plants and Electric Lines) Regulations, 2011.
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The National Electricity Policy, 2005
The Indian government approved the National Electricity Policy on February 12, 2005, in accordance with the provisions of the Electricity Act. The National Electricity Policy, 2005 has material effects on our business since it provides the policy framework to the central and state Electricity Regulatory Commission in developing the power sector, supplying electricity and protecting interests of consumers and other stakeholders, while keeping in view the availability of energy resources, technology available to exploit such resources, economics of generation using different resources and energy security issues. The National Electricity Policy emphasizes the need to promote generation of electricity based on non-conventional sources of energy.
The National Electricity Policy provides that the SERCs should specify appropriate tariffs in order to promote renewable energy, until renewable energy power producers relying on non-conventional technologies can compete with conventional sources of energy. The SERCs are required to ensure progressive increase in the share of generation of electricity from renewable energy sources and provide suitable measures for connectivity with grid and sale of electricity to any person. Further, the SERCs are required to specify, for the purchase of electricity from renewable energy sources, a percentage of the total consumption of electricity in the area of a distribution licensee. Furthermore, the National Electricity Policy provides that such purchase of electricity by distribution companies should be through a competitive bidding process. The National Electricity Policy permits the SERCs to determine appropriate differential prices for the purchase of electricity from renewable energy power producers, in order to promote renewable sources of energy.
The National Tariff Policy, 2006
The Indian government approved the National Tariff Policy on January 6, 2006, in accordance with the provisions of the Electricity Act. The National Tariff Policy, 2006 indirectly impacts our business because it provides the policy framework to the Electricity Regulation Commissions as described below. The National Tariff Policy requires all the SERCs to specify minimum percentages for electricity to be purchased from renewable energy sources. While deciding such percentage, the SERCs must take into account the availability of such resources in the region and its impact on retail tariffs. The National Tariff Policy further provides that procurement of electricity by distribution companies from renewable energy power producers must be done at preferential tariffs determined by the SERCs. Such procurement of electricity by distribution companies for future requirements is to be done, as far as possible, through a competitive bidding process in accordance with the provisions of the Electricity Act among suppliers offering energy from same type of non-conventional sources.
Central Electricity Regulatory Commission (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, 2012
The Central Electricity Regulatory Commission has announced the Central Electricity Regulatory Commission (Terms and Conditions for Tariff Determination from Renewable Energy Sources) Regulations, 2012, or Tariff Regulations, which prescribes the criteria that may be taken into consideration by the SERCs while determining the tariff for the sale of electricity generated from renewable energy sources which include, among others, return on equity, interest on loan capital and depreciation. Accordingly, such tariff cannot be determined independently by renewable energy power producers such as our company. Pursuant to the National Tariff Policy, the Central Electricity Regulatory Commission is required to determine the rate of return on equity which may be adopted by the SERCs to determine the generic tariff, keeping in view the overall risk and prevalent cost of capital, which factors are also to be taken into consideration by SERCs while determining the tariff rate. The Tariff Regulations prescribe that the normative return on equity shall be 20% per annum for the first 10 years and 24% per annum from the 11th year onwards.
The Tariff Regulations also provide the mechanism for sharing of carbon credits from approved clean development mechanism projects between renewable energy power producers and the concerned beneficiaries. Under the Tariff Regulations, the project developer is entitled to retain 100% of the gross proceeds on account of clean development mechanism project benefit in the first year after the date of commercial operation of the
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generating station. Subsequently, in the second year, the share of the beneficiaries is increased to 10% and then progressively increased by 10% every year until it reaches 50% after which the clean development mechanism project proceeds are to be shared equally between the generating company and the beneficiaries.
Jawaharlal Nehru National Solar Mission
The NSM was approved by the Indian government on November 19, 2009 and launched on January 11, 2010. The NSM has set a target of 20,000MW of solar power in India by 2022 and seeks to implement and achieve the target in three phases (Phase I from 2012 to 2013, Phase II from 2013 to 2017 and Phase III from 2017 to 2022). NSM aims at creating conditions for rapid scale up of capacity and technological innovation to drive down costs towards grid parity.
Under the Guidelines for Selection of New Grid Connected Solar PV Power Projects Batch II, or the NSM Guidelines, issued in August 2011, which are applicable to solar power projects commissioned in Batch II of Phase I of the NSM, solar power projects are selected through a reverse bidding mechanism. In this process, solar power projects offering the maximum discount in Rs/kWh on the applicable tariff as approved by the Central Electricity Regulatory Commission are selected first. The project developer is then required to provide certain performance and other bank guarantees to the NTPC Vidyut Vyapar Nigam Limited, which are valid for a period of 16 months from the date of signing the PPA, for the solar photovoltaic projects. NTPC Vidyut Vyapar Nigam Limited subsequently enters into a PPA with project developers in respect of solar photovoltaic projects connected to the grid above 33kW and commissioned before March 2013. After execution of the PPA, the controlling shareholding by the promoter (i.e., more than 50% of the voting rights) in the company developing the project is required to be maintained for a period of one year after commencement of supply of power. Thereafter, any change can be undertaken upon informing the NTPC Vidyut Vyapar Nigam Limited.
Pursuant to the payment security scheme sanctioned by the MNRE for grid connected solar power projects under Phase I of the NSM, the power purchaser is required to open a letter of credit in favor of the project developer to ensure timely payments to the project developer, and in case of any default in payment by the relevant power purchaser, such letter of credit may be encashed and NTPC Vidyut Vyapar Nigam Limited shall also have the right to divert and sell the bundled power in the spot or short term market. The NSM Guidelines also prescribe certain technical requirements for photovoltaic modules that are to be used in grid solar power plants.
While no specific penalty provisions are specified under the NSM Guidelines, PPAs between project developers and offtakers may carry contractual penalties for breach of terms of the agreement.
On October 25, 2013, the MNRE issued guidelines for implementation of a plan for setting up 750MW grid-connected solar power projects under Batch I of Phase II, pursuant to which the MNRE authorized the Solar Energy Corporation of India to implement Phase II of the NSM. The selection process was completed in March 2014. In October 2014, the MNRE issued draft guidelines for selection of 3,000MW grid solar power projects under Tranche I, Batch II of Phase II. These guidelines prescribe financial and other qualification criteria, procedure for selection and other conditions relating to solar power projects. The MNRE has not yet issued final guidelines in this regard.
Renewable Purchase Obligations
The Electricity Act promotes the development of renewable sources of energy by requiring the SERCs to ensure grid connectivity and the sale of electricity generated from renewable sources. In addition, it requires the SERCs to specify, for the purchase of electricity from renewable sources, a percentage of the total consumption of electricity within the area of a distribution licensee, which are known as RPOs. Pursuant to this mandate, most of the SERCs have specified solar and non-solar RPOs in their respective states. In terms of the RPO regulations, RPOs are required to be met by obligated entities (that is, distribution licensees, captive power plants and open access consumers) by purchasing renewable energy, either by entering into PPAs with renewable energy power
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producers or by purchasing renewable energy certificates. The RPO regulations require the obligated entities to purchase power from renewable energy power producers such as our company. In the event of default by an obligated entity in any fiscal year, the SERCs may direct the obligated entity to deposit an amount determined by the relevant SERC, into a fund to be utilized for, among others, the purchase of renewable energy certificates. Additionally, pursuant to the Electricity Act, a defaulting obligated entity may also be liable to pay penalty as determined by the SERCs.
In May 2015, the Supreme Court of India upheld a regulation that made it compulsory for captive power plants and open access consumers to purchase electricity to fulfill their RPOs. This landmark judgment is expected to boost the demand for renewable energy by captive players and also improve the marketability of renewable energy certificates in India.
Safety and Environmental Laws
We are governed by certain safety and environmental legislations, including the Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981, and the Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008.
Under the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981, failure to comply with the orders and restrictions passed by the State Pollution Control Boards may result in imprisonment of a minimum term of one and a half years. Additionally, certain acts including the destruction of property of the State Pollution Control Boards, failure to intimate the emission of pollutants or failure to furnish information to the State Pollution Control Boards may attract monetary penalties of up to Rs. 0.01 million and imprisonment of up to three months.
The failure to comply with the Hazardous Waste (Management, Handling and Transboundary Movement) Rules, 2008 may attract monetary penalties of Rs. 0.1 million and imprisonment of up to five years.
Labor Laws
We are required to comply with certain labor and industrial laws, which includes the Factories Act, 1948, the Industrial Disputes Act, 1947, the Employees State Insurance Act, 1948, the Employees Provident Funds and Miscellaneous Provisions Act, 1952, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, the Workmen Compensation Act, 1923, the Payment of Gratuity Act, 1972, the Contract Labour (Regulation and Abolition) Act, 1970 and the Payment of Wages Act, 1936.
Each of these legislations carry a penalty provision for non-compliance, which prescribe monetary penalties ranging from Rs. 0.001 million to Rs. 0.005 million and imprisonment for periods ranging from one month to three years.
State Regulations
Various states in India have from time to time, announced administrative policies and regulations in relation to solar power projects and related matters. These state-specific policies and regulations have material effects on our business because PPAs between project developers and state offtakers are entered into in accordance with the relevant state policies and regulations. Accordingly, these PPAs are standard form contracts and the project developers have no flexibility in negotiating the terms of the PPAs. The majority of our solar power plant generation occurs in Rajasthan, Punjab and Karnataka.
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For instance, for our projects in the states of Rajasthan, Punjab and Karnataka, our projects are subject to certain state policies as discussed below.
Rajasthan
The Rajasthan Renewable Energy Limited is the agency responsible for promoting and developing renewable energy in the state of Rajasthan. The government of Rajasthan has formulated the Rajasthan Solar Energy Policy, 2014, or Rajasthan Policy, which has come into effect on October 8, 2014 and will remain in force until superseded or modified by another policy. The Rajasthan Policy aims to create an enabling environment for installation of 25,000MW of solar power. Generation of electricity from solar power plants under the Rajasthan Policy will be treated as an eligible industry under the scheme administered by the Industries Department, Government of Rajasthan and incentives available to industrial units under the Rajasthan Investment Promotion Scheme will be available to solar power projects. In accordance with the Rajasthan Policy, a solar power project with a capacity of 500MW or more, established by a single developer at a single location with single or multiple metering requirements but having a common pooling sub-station will be considered as a mega solar power project. Mega solar power projects are entitled to an expedited project approval process.
Punjab
The Punjab Energy and Development Agency is the agency responsible for promotion and development of renewable energy development projects and energy conservation schemes in the state of Punjab. The government of Punjab has formulated the New and Renewable Sources of Energy Policy- 2012, or Punjab Policy, on December 26, 2012. The Punjab Policy aims to harness 1000MW of solar power generation capacity by 2022. All solar power projects developed under the Punjab Policy are treated as an industry in terms of industrial policy of Punjab and all the industrial incentives available to new industrial units will be applicable to solar power plants subject to the approval of Department of Industries and Commerce, Government of Punjab. Additionally, solar power projects are exempt from obtaining any consent in accordance with the pollution control laws from the Punjab Pollution Control Board. The Punjab State Power Corporation Limited reserves the right of first refusal on the power generated from renewable energy certificate based solar power projects and in case of refusal, the developer is permitted to sell the power under open access.
Karnataka
The Karnataka Renewable Energy Development Limited is the agency responsible for promoting and developing renewable energy in the state of Karnataka. The government of Karnataka has formulated the Karnataka Solar Policy 2014-2021, or Karnataka Policy, which will remain in effect until 2021 or until modified by another policy. The Karnataka Policy aims to harness a minimum of 2,000MW by 2021 in multiple phases. Generation of solar power under the Karnataka Policy is attractive to project developers because the policy provides incentives such as tax concessions under the Karnataka Industrial Policy and central excise duty and customs duty exemptions. Solar projects are further exempt from obtaining consent from the Karnataka Pollution Control Board as required under the pollution control laws.
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Directors and Senior Management
The following discussion sets forth information regarding our directors and senior management as of the date of this prospectus. Our board of directors is authorized to appoint officers as it deems appropriate. Provided below is a brief description of our directors and officers business experience during the past five years.
Mr. Sanjeev Aggarwal was nominated as a director by Helion Venture Partners, Mr. William B. Elmore was nominated as a director by Foundation Capital and Mr. Barney S. Rush was nominated as a director by IFC GIF Investment Company.
None of our officers and directors are related, except Mr. Harkanwal S. Wadhwa and Mr. Inderpreet S. Wadhwa. Mr. Harkanwal S. Wadhwa is the father of Mr. Inderpreet S. Wadhwa.
Mr. Eric Ng Yim On and Mr. Muhammad Khalid Peyrye are executives of AAA Global Services Ltd., which provides incorporation, corporate secretarial and governance services to us.
Name |
Age |
Position |
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Directors: |
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Inderpreet Singh Wadhwa |
43 | Director and Chief Executive Officer | ||||
Harkanwal Singh Wadhwa |
71 | Director and Chief Operating Officer | ||||
Robert Kelly |
58 | Director | ||||
Diane Farrell |
60 | Director | ||||
William B. Elmore |
62 | Director | ||||
Sanjeev Aggarwal |
55 | Director | ||||
Barney S. Rush |
63 |
Director |
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Eric Ng Yim On |
48 | Director | ||||
Muhammad Khalid Peyrye |
37 | Director | ||||
Senior Management: |
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Surendra Kumar Gupta |
62 | Chief Financial Officer | ||||
Preet Sandhu |
47 | Senior Vice President Construction | ||||
Sandeep Chopra |
43 | Strategy and Supply Chain Management Head | ||||
Mohor Sen |
66 | Senior Vice President Human Resources | ||||
Glen Minyard |
60 | Senior Vice President Research & Development |
Directors
Inderpreet Singh Wadhwa , one of our founders, has been our chief executive officer and a member of our board of directors since February 2015 and has been the chief executive officer and director of AZI since November 2008. He has over 20 years of experience in technology and infrastructure businesses. Prior to founding AZI, Mr. Wadhwa previously served as a vice president of Loyalty Lab and a senior director of Oracle Corporation. Mr. Wadhwa received his Bachelors degree in Electronics Engineering in 1994 from Guru Nanak Dev University (Punjab). He also graduated from Haas School of Business at University of California Berkeley in 2002.
We believe Mr. Wadhwa is qualified to serve as a member of our board of directors because of his extensive experience in infrastructure projects and prior board service as a director of AZI.
Harkanwal Singh Wadhwa has been a member of our board of directors since August 2015 and has been a director and chief operating officer of AZI since November 2008. He focuses on government relationships and the internal operations of the company. Prior to joining AZI, Mr. Wadhwa served as chief managing director of National Insurance Limited, Indias largest public insurance organization. He has over 40 years of experience in
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the financial services industry in India. He served and/or serves on the boards of General Insurance Corporation of India, India International Insurance Private Limited and Loss Prevention Association of India Limited and has extensive experience with the regulatory framework in India. Mr. Wadhwa received his Bachelors of Arts degree from Punjab University in 1963.
In 2011, the Central Bureau of Investigation of India filed criminal charges in the Court of Sessions for Greater Bombay, India against 11 defendants, including Mr. Harkanwal S. Wadhwa, in connection with his previous services as chief managing director of National Insurance Limited. The charges allege that Mr. Harkanwal S. Wadhwa was part of a criminal conspiracy to cause undue favor and wrongful pecuniary gain to Reliance Industries Limited (a company listed on the Bombay Stock Exchange which is also named as a defendant) in connection with a series of insurance policies written by National Insurance Limited for a subsidiary of Reliance in 2002 and 2003. The Central Bureau of Investigation has alleged that claims paid out on such policies resulted in losses for National Insurance Limited and as a result unjustly enriched Reliance. While the policies were signed by other individuals, the complaint alleges that they were entered into with the tacit approval of Mr. Harkanwal S. Wadhwa. Mr. Harkanwal S. Wadhwa denies the accusations and, in October 2013, filed a motion for the charges against him to be dismissed. That motion is now pending before the court. The relevant transactions predated Mr. Harkanwal S. Wadhwas tenure as an AZI director and executive officer, and the criminal charges are not directed at, and do not concern, the company or any other member of the board of directors or officer of AZI.
We believe Mr. Wadhwa is qualified to serve as a member of our board of directors because of his excellent operations and management skills.
Robert Kelly has been a member of our board of directors since September 2015 and has been a director of AZI since December 2014. From October 2011 to August 2014, he served as the chief financial officer of SolarCity Corporation in San Mateo, California. From August 2009 to October 2011, he served as chief financial officer of Calera Corporation, a clean technology company. Prior to that, he served as an independent consultant providing financial advice to retail energy providers and power developers and also served in various senior leadership roles at Westinghouse Credit Corporation, Lloyds Bank and The Bank of Nova Scotia. Mr. Kelly served as chief financial officer and executive vice president of Calpine Corporation, an independent power producer, from March 2002 to November 2005, as president of Calpine Finance Company from March 2001 to November 2005, and held various financial management roles with Calpine from 1991 to 2001. Mr. Kelly is also a member of the board of directors of Solar Mosaic Inc., a U.S. residential solar lending platform, Solix Algrediants, Inc. a specialty algae products company for the nutrition and personal care markets and SunShare, a community solar developer. He holds a Bachelors degree in Commerce from Memorial University of Newfoundland and an MBA from Dalhousie University, Canada.
We believe Mr. Kelly is qualified to serve as a member of our board of directors because of his extensive business experience, relationships with financial institutions and solar companies and prior board service.
Diane Farrell has been a member of our board of directors since December 2015 and has been a director of AZI since January 2015. Since July 2011, Ms. Farrell has served as executive vice president for the U.S.-India Business Council. Prior to joining the U.S.-India Business Council, Ms. Farrell served on the board of directors at the Export Import Bank of the United States. As a presidential appointee, confirmed by the U.S. Senate, she was responsible for voting on transactions in excess of $10 million as well as on significant policy matters. Her portfolio responsibilities included small businesses, India, Southeast Asia region, and portions of Latin America. In addition, she was named a member of the White House Business Council. Before serving at the Export Import Bank of the United States, Ms. Farrell was elected as the First Selectwoman in Westport, Connecticut and oversaw the construction of schools, a municipal waste water treatment plant, affordable housing, and other necessary facilities. Ms. Farrell received her Bachelors degree in American Government from Wheaton College in 1977.
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We believe Ms. Farrell is qualified to serve as a member of our board of directors because of her extensive business experience in the financial services industry and prior board service.
William B. Elmore has been a member of our board of directors since August 2015 and has been a director of AZI since November 2013. Mr. Elmore co-founded Foundation Capital in 1995. He is a former director and past president of the Western Association for Venture Capitalists, and a past director of the National Venture Capital Association. Mr. Elmore has served on the Advisory Council at Stanford Graduate School of Business and is a board member of the Eastside College Preparatory School and Purdue Research Foundation. Mr. Elmore holds a Bachelor of Science in Electrical Engineering and a Master of Science in Electrical Engineering from Purdue University and an MBA from the Stanford Graduate School of Business.
We believe Mr. Elmore is qualified to serve as a member of our board of directors because of his extensive business experience in the financial services industry and prior board service as a director of AZI.
Sanjeev Aggarwal has been a member of our board of directors since September 2015 and has been a director of AZI since November 2008. Mr. Aggarwal is a co-founder of Helion Venture Partners and has served on the boards of Amba Research, MakeMyTrip Limited and UnitedLex Corporation. He is currently on the boards of IndiaHomes, Eye-Q Vision Private Limited, Clues Networks Inc. and Big Basket. Prior to Helion Venture Partners, Mr. Aggarwal was the founder and chief executive officer of Daksh. Earlier, he worked for 15 years with leading technology companies serving the domestic Indian market. Mr. Aggarwal led the strategic initiatives at Motorola India and has worked with Digital Equipment Corporation in delivering technology solutions. He has also served as the chief executive officer of 3COM India.
We believe Mr. Aggarwal is qualified to serve as a member of our board of directors because of his extensive business experience in the financial industry, relationships with investment firms and prior board service as a director of AZI.
Barney S. Rush has been a member of our board of directors since January 2016. He has served on the board of ISO New England, the electric grid and wholesale market operator for six U.S. states, since October 2013. Since November 2015, he has also been the Senior Representative of Fieldstone Africa, an investment bank raising capital for power projects in Africa. From July 2010 to December 2013, he served as an Operating Partner at Denham Capital Management, L.P., and from July 2003 to November 2009, he served as the CEO of H2Gen Innovations, Inc., a venture capital backed start-up which developed and manufactured skid-mounted hydrogen generators. In addition, Mr. Rush was Group CEO of Mirant Europe and Chairman of the Supervisory Board of Bewag, the electric utility serving Berlin, Germany, from August 1999 to May 2002. Mr. Rush holds a Bachelors degree in Social Studies from Harvard College and a Masters degree in Public Affairs from Woodrow Wilson School of Princeton University.
We believe Mr. Rush is qualified to serve as a member of our board of directors because of his extensive business experience in clean-tech and alternative energy industries.
Eric Ng Yim On was appointed to our board of directors in January 2015 and is one of our resident directors in Mauritius. Mr. Ng has been the chief executive officer of AAA Global Services Ltd. since 2006. Prior to founding AAA Global Services Ltd., Mr. Ng worked for several years with a leading public company listed on the Stock Exchange of Mauritius and served on the board of the holding company as well as its subsidiary companies. Mr. Ng completed his secondary education at the Royal College Curepipe in Mauritius and holds various professional qualifications and memberships, including being a member of the Institute of Chartered Accountants of England and Wales, a member of the International Fiscal Association (Mauritius Branch) and a member of the Mauritius Institute of Professional Accountants.
We believe Mr. Ng is qualified to serve as a member of our board of directors because of his extensive experience with public companies and because he is a resident of Mauritius, and two of the members of our
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board of directors are required to be residents of Mauritius under the terms of our constitution, which we expect to adopt with effect upon completion of this offering, or the Constitution.
Muhammad Khalid Peyrye was appointed to our board of directors in January 2015 and is one of our resident directors in Mauritius. Mr. Peyrye is an executive of AAA Global Services Ltd., having joined the organization in 2007. Prior to joining AAA Global Services Ltd., Mr. Peyrye worked for several years with a leading financial services company and accountancy firm. Mr. Peyrye received his Bachelors degree in Law and Management from the University of Mauritius. He has been involved extensively on company formations, company administration, cross-border investment activities and corporate organizational transactions such as mergers and acquisitions and winding-up of companies. In addition to serving as director on the board of several companies in Mauritius, Mr. Peyrye has, in his career, been involved as money laundering reporting officer and compliance officer of various companies involved in the financial services sector.
We believe Mr. Peyrye is qualified to serve as a member of our board of directors because of his extensive experience with companies having public accountability and because he is a resident of Mauritius, and two of the members of our board of directors are required to be residents of Mauritius under the terms of our Constitution.
Senior Management
Surendra Kumar Gupta has been the chief financial officer of AZI since May 2011. Mr. Gupta has over 37 years of international and domestic experience covering strategic business planning, managing business operations and corporate finance. Prior to joining AZI, Mr. Gupta served as the group chief financial officer for Al-Suwaidi Holding Company Limited, a company involved in providing engineering, procurement, construction and maintenance services to Saudi Arabias predominant oil and gas industry, from 2007 to 2010. Mr. Gupta received his Bachelors degree in Commerce in 1972 from Delhi University. He is a chartered accountant and has been a member of the Institute of Chartered Accountants of India since January 1977.
Preet Sandhu has been the senior vice president of construction of AZI since February 2010. Mr. Sandhu has over 19 years of experience in civil construction and project development in regulated sectors in India with expertise in transportation, energy and land development. Mr. Sandhu manages engineering and construction for AZIs projects.
Sandeep Chopra has been the head of strategy and supply chain management of AZI since May 2013. Mr. Chopra has 15 years of global experience ranging from process re-engineering, project management and finance. From 2005 to 2013, Mr. Chopra worked with HSBC performing different roles in change management for the finance function, ranging from managing large-scale change projects and service delivery teams and setting up a finance offshoring center in India. Prior to HSBC, Mr. Chopra worked at Arthur Andersen, S.R. Batliboi and PricewaterhouseCoopers in their assurance practices. Mr. Chopra completed his general management program from Harvard Business School in 2012. He is a chartered accountant and a member of the Institute of Chartered Accountant of India.
Mohor Sen has been the senior vice president of human resources of AZI since February 2014. Mr. Sen has over 40 years of experience working and consulting for corporations in areas including project management, human resources, organizational development and strategic communications. Prior to joining AZI, Mr. Sen provided consulting services to AZI from January 2013 to January 2014. Prior to that, from 2008 to 2013, he provided consulting services to other companies in India, including Reinforced Earth Company and Geopetro International Holding Inc. Mr. Sen received his Bachelors degree in Technology from the Indian Institute of Technology Delhi and a Masters of Science from the University of Manchester in the United Kingdom.
Glen Minyard has been the senior vice president of Research & Development for Aster Power Inc., a subsidiary of AZI, since September 2010. From 2001 to 2014, Mr. Minyard was also the president of Minyard Solar Electric Inc. From 1992 to 2001, Mr. Minyard was the engineering and production manager at National Renewable Energy Laboratory. Mr. Minyard has 35 years of experience in the solar industry and has participated in the design and construction of over 5,000 solar power plants globally. In addition, he has worked on the
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design, supply, project management and installation of residential and large-scale commercial photovoltaic, wind, and hybrid electrical power systems. Mr. Minyard received his associate degree in Electronic Technology from College of the Redwoods, California, in 1985 and is a Certified CA Electrical Contractor.
Board of Directors
Our holding company is managed and controlled by our board of directors from Mauritius. Our board of directors consists of eight directors. Our board of directors does not have a majority of independent directors. As a foreign private issuer, we are permitted to follow home country corporate governance practices under Section 303A.00 of the Manual. Our home country practice differs from Section 303A.01 of the Manual, because our company is not required under Mauritian law to have a majority of independent directors. A director is not required to hold any shares in our company by way of qualification.
Terms of Directors and Executive Officers
In accordance with our Constitution, one-third of our directors (or, if their number is not a multiple of three, the number nearest to but not less than one-third) shall be up for re-election by rotation at each annual meeting of our company. A director shall be eligible for re-election every three years. The directors up for re-election in each year shall be those who have been in office longest since their last re-election or appointment and as between persons who became or were last re-elected directors on the same day, those up for re-election shall (unless they otherwise agree among themselves) be determined by lot. Any director may be removed by either an ordinary resolution of our shareholders or by the majority vote of the board of directors in the following circumstances: for cause, which refers to willful misconduct, fraud, conviction of a felony, gross negligence or breach of a written policy of the company; or if the director becomes mentally unsound or bankrupt or becomes disqualified from being a director under Mauritius law.
Under Mauritius law, the office of a director of our company is required to become vacant at the conclusion of the annual meeting of our company commencing next after the director attains the age of 70 years. However, a person of or over the age of 70 years may, by ordinary resolution of which no shorter notice is given than that required to be given for the holding of a meeting of shareholders, be appointed or re-appointed or authorized to continue to hold office as a director until the next annual meeting at which such directors class is up for re-election.
A vacancy on the board of directors must be filled by a majority vote of our board of directors.
Executive officers are selected by and serve at the discretion of the board of directors.
Duties of Directors
Under Mauritius law, our directors have a duty to our company to exercise their powers honestly in good faith in the best interests of our company. Our directors also have a duty to our company to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Where a director of a public company also holds office as an executive, the director is required under Mauritius law to exercise that degree of care, diligence and skill which a reasonably prudent and competent executive in that position would exercise. In fulfilling their duty of care to our company, our directors must ensure compliance with the Mauritius Companies Act and our Constitution, as amended from time to time. A shareholder has the right to seek damages against our directors if a duty owed by our directors to him as a shareholder is breached.
The functions and powers of our board of directors include, among others:
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convening shareholders annual meetings and reporting its work to shareholders at such meetings; |
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authorizing dividends and distributions; |
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appointing officers and determining the term of office of officers; |
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exercising the borrowing powers of our company and mortgaging the property of our company, provided that shareholders approval shall be required if any transaction is a major transaction for our company under section 130 of the Mauritius Companies Act, which includes, among others, acquisitions and dispositions worth more than 75% of the value of our companys assets; and |
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approving the issuance and transfer of shares of our company, including the recording of such shares in our share register. |
Subject to the Mauritius Companies Act, our board of directors may delegate to a committee of directors, a director or employee of the company, or any other person, any one or more of its powers.
Committees
Prior to consummation of the offering we intend to establish two committees under our board of directors: an audit committee and a compensation committee. Each committees members and functions are described below.
Audit Committee
In accordance with the rules of the New York Stock Exchange, or NYSE, we will have at least three independent members on the audit committee within one year of listing and a fully independent committee within one year of the effective date of the registration statement. The initial members of our audit committee will consist of Mr. Robert Kelly and Mr. Sanjeev Aggarwal. Each of these individuals satisfies the independence requirements set forth in the New York Stock Exchanges Listed Company Manual, or the Manual. They also satisfy the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934, or the Exchange Act. We intend to add another independent director to the audit committee within one year of listing. Our board of directors also has determined that Mr. Kelly qualifies as an audit committee financial expert within the meaning of the SEC rules. Our audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. Our audit committee is responsible for, among other things:
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selecting our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors; |
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reviewing with the independent auditors any audit problems or difficulties and managements response; |
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regularly reviewing the independence of our independent auditors; |
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reviewing and approving all related party transactions on an ongoing basis; |
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discussing the annual audited financial statements with management and our independent auditors; |
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reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; |
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monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; |
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meeting separately and periodically with management and our internal and independent auditors; |
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reporting regularly to our full board of directors; and |
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such other matters that are specifically delegated to our audit committee by our board of directors from time to time. |
Compensation Committee
Our compensation committee will consist of Ms. Diane Farrell and Mr. Sanjeev Aggarwal. Each of these individuals satisfies the independence requirements set forth in the Manual. Our compensation committee assists our board of directors in reviewing and approving the compensation structure of our directors and executive
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officers, including all forms of compensation to be provided to our directors and executive officers. Members of the compensation committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:
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reviewing and approving the compensation package for our executive officers; |
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reviewing the compensation of our executive officers and directors and making recommendations to the board with respect to the compensation; |
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reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, other executive officers and directors evaluating the performance of our chief executive officer, other executive officers and directors in light of those goals and objectives, and setting the compensation level of our chief executive officer, other executive officers and directors based on such evaluation; and |
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reviewing periodically and making recommendations to the board regarding any long term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
Nominations Committee
We currently do not have in place a nominations committee, and the actions ordinarily taken by such committee are resolved by a majority of the independent directors on our board. As a foreign private issuer, we are permitted to follow home country corporate governance practices under Section 303A.00 of the Manual. Our home country practice differs from Section 303A.04(a) and Section 303A.09 of the Manual regarding implementation of a nominations committee charter or board resolution and adoption and disclosure of corporate governance guidelines, respectively, because our company, as a holder of a GBC1 issued by the Financial Services Commission of Mauritius, is not required under Mauritian law to establish a nominations committee or adopt and disclose corporate governance guidelines.
Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics provides that our directors, officers and employees are expected to avoid any action, position or interest that conflicts with the interests of our company or gives the appearance of a conflict. Directors, officers and employees have an obligation under our Code of Business Conduct and Ethics to advance our companys interests when the opportunity to do so arises. The execution and compliance with the Code of Business Conduct and Ethics will be administered by our ethics committee, which will consist of one director, Mr. William B. Elmore.
Director and Officer Compensation
Director Compensation
During fiscal year 2015, we paid cash compensation to Mr. Inderpreet S. Wadhwa and Mr. Harkanwal S. Wadhwa as described under Officer Compensation below. We also granted Mr. Inderpreet S. Wadhwa and Mr. Robert Kelly options to purchase equity shares under AZIs employees stock option plan, which options have been cancelled and replaced by options issued pursuant to our 2015 Employee Stock Option Plan. Stock compensation paid to our directors is disclosed separately in the table under Outstanding Options.
Officer Compensation
The following table sets forth all of the cash compensation paid by us or our subsidiaries in fiscal year 2015 to each of our executive officers for such persons service as an officer (including contingent or deferred
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compensation accrued during fiscal year 2015). These cash compensation amounts for fiscal year 2015 do not include stock compensation. Stock compensation to our executive officers is disclosed separately in the table under Outstanding Options.
(1) | The amounts in this column represent total performance-based bonuses earned for services rendered during fiscal year 2015. The amount of performance based bonuses are determined based on the performance of the company, the department the individual works for and the individual, and such bonuses are only paid if the individual is in employment at the time of disbursement. |
(2) | This includes any reimbursement, employer contribution to the provident fund, leave encashment provision and gratuity provision. See Employee Benefit Plans for a description of each plan. |
Employee Benefit Plans
We maintain employee benefit plans in the form of certain statutory and incentive plans covering substantially all of our employees. For fiscal year 2015, the aggregate amount set aside or accrued by us to provide for pension or retirement benefits for executive officers was Rs. 3,511,310.
Provident Fund
In accordance with Indian law, all of our employees in India are entitled to receive benefits under the Employees Provident Fund Scheme, 1952, as amended, a retirement benefit scheme under which an equal amount of 12% of the base salary of an employee is contributed both by employer and employee in a fund with government/trust with company.
Gratuity
In accordance with Indian law, we pay gratuity to our eligible employees in India. Under our gratuity plan, an employee is entitled to receive a gratuity payment on his superannuation or on his retirement or on the termination of his or her employment if the employee has rendered continuous service to our company for not less than five years, or if the termination of employment is due to death or disability due to accident or disease. The amount of gratuity payable to an eligible employee is equal to 15 days salary based on the last drawn salary for every completed year of employment (or any portion of a year exceeding six months), and currently the aggregate amount of gratuity shall not exceed Rs. 1,000,000.
Leave Encashment Policy
Under AZIs leave encashment policy, an employee is entitled to receive a payment in exchange for any accrued leave of absence exceeding 45 days that is outstanding as of April 1 of each fiscal year. Such payment shall be made to the employee by April 30 of that year. In the event of resignation, termination of employment or retirement, an employee is entitled to a payment for the accrued leave of absence up to a maximum of 45 days if the employee has spent at least 240 working days at AZI. The amount of payment to be made for each day of such accrued leave of absence shall be calculated by dividing the last drawn monthly base salary by 30 days.
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Employment Agreements
Most of our executive officers have entered into an employment agreement with AZI. Following the completion of this offering, we expect that such officers will continue under their employment agreements with AZI. Aside from the employee benefit plans, our employment agreements do not provide for any special termination benefits, nor do we have any other arrangements with our directors for special termination benefits.
Each executive officer has acknowledged that ownership of any intellectual property created by him for the company shall vest in the company. Additionally, Mr. Inderpreet Singh Wadhwa, Mr. Preet Sandhu and Mr. Glen Minyard have also agreed to transfer and assign to the company all rights, title and interest in and to all the trademarks, trade names, brand names, patents, designs, domain names and other intellectual property rights created by them for the company.
In addition, each executive officer has agreed to be bound by the non-competition and non-solicit restrictions set forth in his employment agreement. Specifically, each executive officer has agreed, while employed by us and for a period of one year after termination of his employment, not to:
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directly or indirectly, enter into the employment of, tender consulting or other services to, acquire any interest in, or otherwise participate in any business that competes, directly or indirectly, with any of the companies or entities in the same lines of business that the company is engaged in at the time the employment is terminated; nor |
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solicit, encourage, or induce or attempt to solicit, encourage, or induce any employee or customer, or prospective employees and customers with whom the company has had discussions or negotiations within the last six months of the termination of his employment not to establish a relationship with the company. |
The non-competition provision in Mr. Glen Minyards employment agreement is effective for six months after the termination of his employment, instead of for one year. In addition, the employment agreements for Mr. Sandeep Chopra and Mr. Surendra Kumar Gupta specify that they are not to be associated with any competitor of the company whatsoever for a period of at least 12 months after termination of their employment and that they will not solicit or entice any of the companys customers or any other employee working in the company during or at any time after the termination of their employment.
Other relevant information of each of the employment agreement is provided below.
Employment Agreement with Inderpreet Singh Wadhwa
AZI has entered into an employment agreement that provides for the appointment and employment of Mr. Inderpreet Singh Wadhwa as the Managing Director of AZI. Pursuant to the agreement, Mr. Wadhwa is entitled to a remuneration of Rs. 12,600,000 effective April 1, 2015. Mr. Wadhwa was granted options to purchase 431 equity shares of AZI at Rs. 10 per share pursuant to AZIs employees stock option plan. These options have been cancelled and Mr. Wadhwa has been granted options to purchase 431 shares of Azure Power Global Limited pursuant to our 2015 Employee Stock Option Plan. The employment agreement with Mr. Wadhwa does not have a fixed term of employment. The company may terminate Mr. Wadhwas employment without cause, but must provide two months prior notice or two months salary in lieu of the notice.
Employment Agreement with Surendra Kumar Gupta
AZI has entered into an employment agreement with Mr. Surendra Kumar Gupta, our chief financial officer. Effective April 1, 2015, he was entitled to a remuneration of Rs. 8,250,000, which includes Rs. 1,650,000 as a performance incentive. This performance incentive is linked to the performance of the company, his department, and himself. The performance incentive is only to be paid if the individual is in full-time employment with the company at the time of disbursement. Mr. Gupta was also granted 2,262 equity shares of AZI pursuant to AZIs
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employee stock option plan. These options have been cancelled and Mr. Gupta has been granted options to purchase 2,262 shares of Azure Power Global Limited pursuant to our 2015 Employee Stock Option Plan. In addition, Mr. Gupta is entitled to a company car.
We may terminate Mr. Guptas employment without cause, but must provide six months prior notice or six months salary in lieu of the notice.
Employment Agreement with Preet Sandhu
AZI has entered into an employment agreement with Mr. Preet Sandhu, our senior vice president of construction. Pursuant to the agreement, Mr. Sandhu was entitled to a remuneration of Rs. 6,793,200 per annum effective April 1, 2015. Mr. Sandhu has been granted 3,190 equity shares of Azure Power Global Limited pursuant to our 2015 Employee Stock Option Plan. We may terminate Mr. Sandhus employment without cause, but must provide six months prior notice or six months salary in lieu of the notice.
Employment Agreement with Sandeep Chopra
AZI has entered into an employment agreement with Mr. Sandeep Chopra, our head of strategy and supply chain management. Effective April 1, 2015, Mr. Chopra was entitled to a remuneration of Rs. 9,491,812, which includes Rs. 1,944,610 as a performance incentive. In addition, Mr. Chopra was granted 1,379 equity shares of AZI pursuant to AZIs employee stock option plan. These options have been cancelled and Mr. Chopra has been granted options to purchase 1,379 shares of Azure Power Global Limited pursuant to our 2015 Employee Stock Option Plan.
We may terminate Mr. Chopras employment without cause, but must provide six months prior notice or six months salary in lieu of the notice.
Employment Agreement with Mohor Sen
AZI has entered into an employment agreement with Mr. Mohor Sen, our senior vice president of human resources. Effective April 1, 2015, Mr. Sen was entitled to a remuneration of Rs. 5,520,000 per annum.
We may terminate Mr. Sens employment without cause, but must provide six months prior notice or six months salary in lieu of the notice.
Employment Agreement with Glen Minyard
Aster Power Inc. has entered into an employment agreement with Mr. Glen Minyard, our senior vice president of Research & Development. Effective April 1, 2015, Mr. Minyard was entitled to a remuneration of US$190,704 per year. Also, under the agreement, the company has agreed to provide Mr. Minyard with the following benefits: (a) appropriate stipend for travels; (b) a travel health insurance policy with a reasonable coverage; (c) a cell phone with an international coverage; (d) leaves during the year; (e) a variable bonus of US$20,000 per annum based on his satisfactory performance during the year as evaluated and agreed by the chief executive officer; and (f) a business class travel for flights longer than five hours in one direction. In addition, Mr. Minyard was granted options to purchase 1,544 equity shares of AZI. These options have been cancelled and Mr. Minyard has been granted options to purchase 1,544 shares of Azure Power Global Limited pursuant to our 2015 Employee Stock Option Plan.
We may terminate Mr. Minyards employment without cause, but must provide six months prior notice or six months salary in lieu of the notice.
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Equity-Based Compensation
Our 2015 Employee Stock Option Plan is a comprehensive incentive compensation plan under which we can grant equity-based and other incentive awards to our officers, employees and directors.
The objective of the 2015 Employee Stock Option Plan, is (i) to provide means to enable us to attract and retain high quality human resources in our employment; (ii) to make the compensations and rewards competitive in the market; and (iii) to achieve sustained growth and create shareholder value by aligning the interests of the employees with our long term interests.
Azure Power Global Limited intends to adopt the 2016 Equity Incentive Plan, which will go into effect as of the consummation of this transaction. The 2016 Equity Incentive Plan will replace the 2015 Employee Stock Option Plan, which Azure Power Global Limited adopted on July 20, 2015. Options granted pursuant to the 2015 Employee Stock Option Plan will be cancelled and replaced with options granted pursuant to the 2016 Equity Incentive Plan. The 2015 Employee Stock Option Plan replaced the AZI employee stock option plan and options granted to purchase equity shares of AZI pursuant to the AZI employee stock option plan have been cancelled and replaced with options to purchase equity shares of Azure Power Global Limited pursuant to the 2016 Equity Incentive Plan.
As of December 31, 2015, Azure Power Global Limited had outstanding options exercisable into a total of 25,930 equity shares. Options granted pursuant to our 2015 Employee Stock Option Plan are entitled to equitable adjustment to account for certain corporate transactions, including stock splits and the conversion of convertible securities into equity shares. After giving effect to our for stock split and the conversion of our outstanding compulsorily convertible preferred shares and compulsorily convertible debentures into equity shares, Azure Power Global Limiteds outstanding options as of December 31, 2015 would have been exercisable into a total of equity shares.
The following paragraphs further describe the principal terms of the 2015 Employee Stock Option Plan.
Administration
The 2015 Employee Stock Option Plan will be administered by the compensation committee of our board. Among other things, the compensation committee determines the terms and conditions of each option to be granted, including, but not limited to, the number of options, exercise price, vesting period, exercise period and any lock-in period.
Number of Shares Authorized for Grant
Under the terms of the 2015 Employee Stock Option Plan, which may be amended from time to time, the sum of all grants made under the employee stock option plan shall not exceed 10% of our total issued and subscribed equity capital.
Eligibility
Our compensation committee may grant options to all eligible employees on the basis of the following criteria: position, role and performance of the employee, tenure in organization and such other factors as the compensation committee may decide from time to time.
Vesting Schedule
The grants made to any individual shall be vested in the following manner:
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25% on the expiry of 12 months from the date of grant; |
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25% on the expiry of 24 months from the date of grant; |
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25% on the expiry of 36 months from the date of grant; and |
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25% on the expiry of 48 months from the date of grant. |
Option Exercise
There shall be no lock-in period after the options have vested and the options must be exercised by the employees before the end of the tenure of the plan.
Amendment or Termination
Our board of directors may in its absolute discretion amend, alter or terminate the employee stock option plan from time to time, provided that no amendment, alteration or termination in any grant would impair or prejudice the rights of the employee without the consent of the employee, and provided further that the board of directors may not, without the approval of the shareholders, amend the 2015 Employee Stock Option Plan (1) to increase the aggregate number of shares which may be issued pursuant to the provisions of the employee stock option plan on exercise, surrender of options or upon grants; (2) to change the option exercise price; or (3) to extend the maximum period during which the grants may be made under the plan.
Outstanding Options for Directors and Senior Management
During fiscal year 2015, Mr. Inderpreet S. Wadhwa, Mr. Surendra Kumar Gupta and Mr. Robert Kelly were granted options to acquire 1,100 equity shares, 360 equity shares and 2,860 equity shares under AZIs employee stock option plan, respectively. During fiscal year 2016, Mr. Inderpreet S. Wadhwa, Mr. Surendra Kumar Gupta, Mr. Harkanwal Singh Wadhwa, Mr. Preet Sandhu, Mr. Glen Minyard and Mr. Sandeep Chopra were granted options to acquire 431 equity shares, 102 equity shares, 115 equity shares, 92 equity shares, 44 equity shares and 79 equity shares under AZIs employee stock option plan, respectively. These options have been cancelled and replaced by options issued pursuant to our 2015 Employee Stock Option Plan. As set forth in the following table, outstanding options as of December 31, 2015 under our 2015 Employee Stock Option Plan were:
Name |
Equity Shares
Underlying Outstanding Options |
Exercise Price
(US$ Per share) |
Date of
Expiration |
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Directors: |
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Inderpreet Singh Wadhwa |
6531 | 0.16 | July 20, 2025 | |||||||||
Harkanwal Singh Wadhwa |
2500 | 75.72 | July 20, 2025 | |||||||||
115 | 0.16 | July 20, 2025 | ||||||||||
Robert Kelly |
2860 | 175.31 | July 20, 2025 | |||||||||
Senior Management: |
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Surendra Kumar Gupta |
600 | 43.38 | July 20, 2025 | |||||||||
1200 | 75.72 | July 20, 2025 | ||||||||||
360 | 0.16 | July 20, 2025 | ||||||||||
102 | 0.16 | July 20, 2025 | ||||||||||
Preet Sandhu |
648 | 28.19 | July 20, 2025 | |||||||||
2450 | 43.38 | July 20, 2025 | ||||||||||
92 | 0.16 | July 20, 2025 | ||||||||||
Sandeep Chopra |
1300 | 75.72 | July 20, 2025 | |||||||||
79 | 0.16 | July 20, 2025 | ||||||||||
Glen Minyard |
1163 | 43.38 | July 20, 2025 | |||||||||
337 | 43.38 | July 20, 2025 | ||||||||||
44 | 0.16 | July 20, 2025 | ||||||||||
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|
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25,930 | ||||||||||||
|
|
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Indemnification Agreements
We will enter into indemnification agreements with each of our directors to indemnify them against certain liabilities and expenses arising from their being a director.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information regarding the pro forma beneficial ownership of our equity shares as of the date of this prospectus by:
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each of our directors and senior management; |
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each person known by us to own more than 5% of our equity shares; and |
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the selling shareholder. |
We have determined beneficial ownership in accordance with the rules of the SEC. The number of equity shares beneficially owned before the offering set forth below assumes the conversion of outstanding compulsorily convertible preferred shares and compulsorily convertible debentures into an aggregate of equity shares (assuming an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus) and the effectiveness of a -for- stock split of our equity shares, both of which will take place immediately prior to the consummation of this offering. Except as indicated in the footnotes below, we believe, based on the information furnished to us, that the persons named in the following table have sole voting and investment power with respect to all equity shares that they beneficially own, subject to applicable community property laws.
The percentage ownership of each listed person before this offering is based upon equity shares outstanding prior to this offering, including an aggregate of equity shares to be issued upon the conversion of compulsorily convertible preferred shares and compulsorily convertible debentures immediately prior to the consummation of this offering, based on an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus. The percentage ownership of each listed person after the offering is based upon equity shares outstanding immediately after the closing of this offering, including the equity shares identified in the immediately preceding sentence plus the equity shares to be sold by us in this offering.
In computing the number of equity shares beneficially owned by a person and the percentage ownership of that person, we deemed outstanding equity shares subject to options held by that person that are currently exercisable or exercisable within 60 days after the date of this prospectus. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
The underwriters have an option for a period of 30 days from the date of this prospectus to purchase up to an additional equity shares from us at the initial public offering price less the underwriting discounts and commissions.
None of our shareholders will have different voting rights from other shareholders after the completion of this offering. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
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Unless otherwise indicated, the principal address of each of the shareholders below is c/o Azure Power India Private Limited, 8 Local Shopping Complex, Pushp Vihar, Madangir, New Delhi 110062, India.
* | Less than 1% of the outstanding equity shares. |
(1) | The sole member of IW Green LLC is Mr. Inderpreet S. Wadhwa. IW Green LLC was known as IW Green Inc. prior to its conversion to IW Green LLC in October 2015. |
(2) | International Finance Corporation is an international organization established by Articles of Agreement among its member countries. Its principal address is 2121 Pennsylvania Avenue, NW, Washington, District of Columbia 20433, United States. |
(3) | Helion Investment Management, LLC holds the voting power in Helion Venture Partners II, LLC. SA Holdings Global Ltd and Gupta Goyal Trust are the beneficial owners of Helion Investment Management, LLC. Mr. Sanjeev Aggarwal is the beneficial owner of SA Holdings Global Ltd and Mr. Ashish Gupta and Ms. Nita Goyal are the beneficial owners of Gupta Goyal Trust. Each of the beneficial owners disclaims beneficial ownership in the shares held by the aforementioned entities except to the extent of his or her pecuniary interest therein. The principal address of Helion Venture Partners II, LLC is Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius. |
(4) | Helion Investment Management, LLC holds the voting power in Helion Venture Partners India II, LLC. SA Holdings Global Ltd and Gupta Goyal Trust are the beneficial owners of Helion Investment Management, LLC. Mr. Sanjeev Aggarwal is the beneficial owner of SA Holdings Global Ltd and Mr. Ashish Gupta and Ms. Nita Goyal are the beneficial owners of Gupta Goyal Trust. Each of the beneficial owners disclaims beneficial ownership in the shares held by the aforementioned entities except to the extent of his or her pecuniary interest therein. The principal address of Helion Venture Partners India II, LLC is Les Cascades Building, Edith Cavill Street, Port Louis, Mauritius. |
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(5) | FC VI India Holding (Mauritius) Ltd. is the beneficial owner of all equity interests of FC India Venture (Mauritius) Ltd. and exercises sole voting and investment power over the shares owned by FC India Venture (Mauritius) Ltd. Foundation Capital VI, L.P. and Foundation Capital VI Principals Fund, LLC are the beneficial owners of FC VI India Holding (Mauritius) Ltd. The general partner of Foundation Capital VI, L.P. and Foundation Capital VI Principals Fund, LLC is Foundation Capital Management Co. VI, LLC. The managing members of Foundation Capital Management Co. VI, LLC are Mr. William B. Elmore, Mr. Paul Koontz, Mr. Michael Schuh, Mr. Paul Holland, Mr. Richard Redelfs, Mr. Steve Vassallo, Mr. Charles Moldow and Mr. Warren Weiss. Each of the managing members of Foundation Capital Management Co. VI, LLC disclaims beneficial ownership in the shares held by the aforementioned entities except to the extent of his or her pecuniary interest therein. The address of Foundation Capital Management Co. VI, LLC is 250 Middlefield Road, Menlo Park, CA 94025. |
(6) | IFC Global Infrastructure (GP) LLC and IFC Global Infrastructure (Alternate GP) LLP are beneficial owners of all equity interests of IFC GIF Investment Company I. The principal address of IFC GIF Investment Company I is c/o Cim Fund Services Ltd., 33 Edith Cavell Street, Port Louis, Mauritius. |
(7) | Mr. Minyards business address is 20700 Timber Ct., Willits, CA 95490, United States. |
(8) | Shares held by FC VI India Ventures (Mauritius) Ltd. do not include any equity shares directly held by Mr. Elmore. Mr. Elmore, a general partner of Foundation Capital, may be deemed to indirectly beneficially own such shares through the interest held by funds managed by Foundation Capital. Mr. Elmores business address is c/o Foundation Capital, 250 Middlefield Road, Menlo Park, CA 94025, United States. |
(9) | Ms. Farrells business address is U.S.-India Business Council, 1615 H Street, NW, Washington, District of Columbia 20062, United States. |
(10) | Does not include any equity shares of Mr. Aggarwal, a managing director of Helion Venture Partners, who may be deemed to beneficially own through interests held by funds managed by Helion Venture Partners. Mr. Aggarwals business address is Helion Advisors Private Limited, Tower B, 10th Floor, Vatika Towers, Sector 54, Gurgaon, 122 002, India |
(11) | Mr. Rushs business address is 6917 Maple Avenue, Chevy Chase, Maryland 20815 |
(12) | DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbH, or DEG, is owned by KfW. KfW is the beneficial owner of all the equity interests of DEG. The Federal Republic of Germany is the beneficial owner of KfW and exercises sole voting and investment power over the shares owned by KfW. The Federal Republic of Germany disclaims beneficial ownership in the shares held by KfW except to the extent of its pecuniary interests therein. DEGs principal address is Kämmergasse 22, 50676 Kôln, Germany. |
In addition, after the consummation of this offering and subscription of shares described under Prospectus Summary Corporate Structure, Mr. Inderpreet Singh Wadhwa, Mr. Harkanwal Singh Wadhwa, Azure Power Inc. and Mr. Satnam Sanghera will own %, % and % of the equity shares of AZI, assuming an offer price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus.
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Our Related Party Transaction Policies
We believe that the terms of our related party transactions are comparable to the terms we could obtain from independent third parties. Subsequent to this offering, we expect that our related party transactions will continue to be conducted on the same basis. However, upon the completion of this offering, our related party transactions will be subject to the review and approval of the audit committee of our board of directors. Our audit committee will consider whether the transaction is to be conducted on an arms-length basis and whether the services can be procured from an independent third party. The charter of our audit committee as adopted by our board of directors provides that we may not enter into any related-party transaction unless and until it has been approved by the audit committee.
Lease Agreement
On November 28, 2011, AZI entered into a lease agreement, which became effective from December 1, 2011, for our registered office building with family members of Mr. Inderpreet Singh Wadhwa. The transaction was conducted in the normal course of operations, transacted at the market rate and was approved by a majority of the board of directors independently. AZI renewed the lease agreement on October 15, 2013 for a term of five years ending on April 30, 2018, cancellable after 12 months. During fiscal years 2013, 2014 and 2015 and for the nine months ended December 31, 2015, we paid Rs. 12.6 million, Rs. 14.3 million, Rs. 14.5 million and Rs. 21.8 million in rent, respectively. Pursuant to the lease agreement, we have paid Rs. 6.3 million to the lessors as interest free retention money, which is to be returned to us upon the termination of the lease, provided that we hand over satisfactory possession of the leased premises to the lessors.
Private Placements
In September 2012, AZI issued 79,909 Series D compulsorily convertible preferred shares at a price of Rs. 5,631 per share to FC VI India Ventures (Mauritius) Ltd. and Helion Venture Partners II, LLC, each of which held a % interest in the voting power of AZI. The price per share was determined after the foregoing investors offered better pricing terms than the price per share offered in arms length negotiations by independent investors. The transaction was approved by the board of directors. In connection with the issuance of Series D compulsorily convertible preferred shares, AZI and our founders, Mr. Inderpreet Wadhwa and Mr. Harkanwal Wadhwa, entered into an Investment Agreement with the foregoing investors.
In June 2014, AZI issued 79,245 Series F compulsorily convertible preferred shares at a price of Rs. 11,224.75 per share to FC VI India Ventures (Mauritius) Ltd. and Helion Venture Partners II, LLC. The price per share was determined after the foregoing investors offered better pricing terms than the price per share offered in arms length negotiations by independent investors. The transaction was approved by the board of directors. In connection with the issuance of Series F compulsorily convertible preferred shares, AZI and Mr. Inderpreet Wadhwa entered into an Investment Agreement with the foregoing investors. In December 2014, AZI issued an additional 38,581 Series F compulsorily convertible preferred shares at a price of Rs. 11,224.75 per share to FC VI India Ventures (Mauritius) Ltd. and Helion Venture Partners II, LLC.
In June 2014, AZI issued 36,000 compulsorily convertible debentures to International Finance Corporation, which held a % interest in the voting power of AZI, at a price of Rs. 5,000 per share. The price per share was determined after the foregoing investor offered better pricing terms than the price per share offered in arms length negotiations by independent investors. The transaction was approved by the board of directors. In February 2015, AZI issued 20,307 additional Series F compulsorily convertible preferred shares at a price of Rs. 11,224.75 per share to International Finance Corporation.
In June 2015, we entered into a subscription agreement with International Finance Corporation and its affiliated entity for the sale of 133,285 shares of Series H compulsorily convertible preferred shares for
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US$60 million, which we amended in July 2015. In July 2015, we entered into a subscription agreement with Société de Promotion et de Participation pour la Coopération Économique, or PROPARCO, for the sale of 18,882 shares of Series G compulsorily convertible preferred shares for US$8.5 million.
Shareholders Agreements
On July 22, 2015, we, AZI and our founders, Mr. Inderpreet Wadhwa and Mr. Harkanwal Wadhwa, entered into an amended shareholders agreement, or the AZI Shareholder Agreement, (which supersedes earlier shareholder agreements). Pursuant to the AZI Shareholders Agreement, we have the right to nominate four directors to AZIs board, our founders together have the right to nominate two directors who shall be shareholders or consultants of AZI or Azure Power Global Limited, and shareholders holding more than 50% of the share capital of AZI on a fully diluted basis shall have the right to nominate one director who shall be an independent director. The AZI Shareholders Agreement provides that it is the intention of all parties to the agreement to eventually make AZI our wholly-owned subsidiary. Pursuant to the AZI Shareholders Agreement we have a right to require AZI to purchase all AZI equity securities held by our founders, we have a call option pursuant to which we have the right to require our founders to sell all or part of their AZI equity securities to us or our nominee purchaser and our founders have a put option (not an obligation) pursuant to which they have the right to require us or our nominee purchaser to purchase all or part of their AZI equity securities, in each case at the minimum price permissible under applicable law for such purchases of AZI equity securities. In addition, the AZI Shareholders Agreement prohibits transfers of AZI equity securities by our founders without our consent.
In addition, on July 22, 2015, we entered into a separate shareholders agreement, or the APGL Shareholders Agreement, among us, IFC, Helion Venture Partners II, LLC, Helion Venture Partners India II, LLC, FC VI India Venture (Mauritius) Ltd., DEG, PROPARCO, IFC GIF Investment Company I, or GIF, and IW Green Inc. (which has since been converted to IW Green LLC) and our founders, Mr. Inderpreet Wadhwa and Mr. Harkanwal Wadhwa. The APGL Shareholders Agreement provides for certain preferential rights, including director nomination rights, rights of first offer, drag-along rights, rights of first refusal, co-sale rights, call options, information rights and consent rights on certain corporate matters. The APGL Shareholders Agreement will terminate upon the completion of this offering except for the following provisions: (A) a provision requiring, as long as IFC and GIF collectively own an aggregate of 5% of our equity share capital, shareholder approval by special resolution for (i) amendments to AZI and its subsidiaries articles of association or memorandum of association, except as such amendments may be required for certain financing matters, (ii) material sales or disposals of our assets or our incurrence of material liabilities, (iii) changes to our business or the business of our subsidiaries and (iv) amendments to our share option plan; (B) a provision requiring, as long as IFC and/or GIF hold any of our equity shares, shareholder approval by ordinary resolution to be obtained for equity issuances of more than 10% of our share capital; and (C) provisions requiring our continued compliance with certain standard policies of IFC and PROPARCO on, among other things, environmental, social and anti-corruption issues, as long as IFC or PROPARCO, respectively, hold any of our equity securities. For more information on the voting requirements of ordinary and special resolutions. See Description of Share CapitalVoting Rights.
Registration Rights Agreement
We intend to enter into a registration rights agreement with IFC, IFC GIF Investment Company I, PROPARCO, FC VI India Venture (Mauritius) Ltd., Helion Venture Partners II, LLC, Helion Venture Partners India II, LLC and DEG, pursuant to which we will grant certain registration rights to certain holders of our equity shares, as described in greater detail in Description of Share Capital Registration Rights.
Loans to Senior Management
During fiscal year 2014, we made an unsecured, non-interest bearing loan to our Chief Executive Officer and Director, Mr. Inderpreet Wadhwa, amounting to Rs. 41.4 million ($668,605, based on the exchange rate as of the relevant balance sheet date). This loan was repaid in March 2015.
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Personal Guarantees
Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have personally guaranteed the repayment of a number of AZIs loans. Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have each also personally guaranteed a loan from Reliance Capital Limited in the amount of Rs. 1 billion. As of January 31, 2016, we have yet to receive Rs. 102 million of disbursements under this loan. In addition, in connection with a working capital facility provided by the Central Bank of India, Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have each guaranteed Rs. 543.3 million and Rs. 69.7 million, respectively, in favor of the lender.
In addition, Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa have provided personal guarantees in favour of the Central Bank of India for the repayment of loans of three of our project subsidiaries in the amounts of Rs. 315 million, Rs. 639 million and Rs. 1,306 million, in addition to the payment of any interest and other monies payable to the lender.
Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa did not receive any separate remuneration from the company for providing the guarantees.
Indemnification Agreements
We will indemnify our directors and officers as permitted by our constitution, which we expect to adopt with effect upon completion of this offering, and pursuant to indemnification agreements entered into with such directors and officers, as described in Management Indemnification Agreements.
Employment Agreements
See Management Employment Agreements.
Equity-Based Compensation Plans
See Management Equity-Based Compensation Plans.
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Equity Shares
General
All of the equity shares are fully paid. The preparation, issue and delivery of certificates shall be governed by the Mauritius Companies Act.
Our constitution that will be in effect upon the completion of this offering, or the Constitution, authorizes the issuance of equity shares at $0.01 par value per share. As of the date of this prospectus, equity shares were issued. Immediately prior to the consummation of this offering, we will have a total of equity shares issued and outstanding after giving effect to the corporate formation transactions described under Prospectus Summary Corporate Structure, assuming a total of equity shares will be issued to the non-founder investors upon the conversion of convertible securities, based on an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus. Upon the completion of this offering, we will have equity shares outstanding, based on an assumed initial public offering price of US$ per equity share, the midpoint of the price range set forth on the cover page of this prospectus, and assuming the underwriters do not exercise their over-allotment for additional shares.
Dividends
To the extent permitted by the Mauritius Companies Act and our Constitution, dividends may only be paid out of retained earnings (after having made good any accumulated losses of ours at the beginning of any relevant accounting period), to the shareholders according to their rights and interests, and no distribution (which term includes dividend) may be made unless our board of directors is satisfied that, upon the distribution being made (1) we are able to pay our debts as they become due in the normal course of business and (2) the value of our assets is greater than the sum of (a) the value of our liabilities and (b) our stated capital. Subject to the Mauritius Companies Act and our Constitution, the declaration and payment of any dividend has to be authorized by the board of directors.
Any distribution or part thereof payable in cash, or any other sum payable in cash to the holder of shares may be paid by wire transfer to the account designated by the Shareholder or by cheque, postal, or money order sent through the post or by courier addressed to the holder at his address in our register of shareholders or, in the case of joint holders, addressed to the holder whose name stands first in our register of shareholders in respect of the shares at his registered address as appearing in the said register or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque, postal, money order or wire transfer shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first in our register of shareholders in respect of such shares, and shall be sent at his or their risk and payment of the cheque, postal, money order or wire transfer by the bank on which it is drawn shall constitute a good discharge to us. Any one of two or more joint holders may give effectual receipts for any dividends, distributions or other monies payable or property distributable in respect of the shares held by such joint holders.
Any dividend or distribution out of retained earnings unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to us and the payment by our board of directors of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute us a trustee in respect thereof.
Voting Rights
Subject to any rights or restrictions as to voting for the time being attached to any class of shares and our Constitution, each holder of the equity shares who is present in person or by proxy at a meeting of shareholders
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shall have one vote for every equity share which he holds or represents. Voting at any meeting of shareholders is by person or by proxy. A poll may be demanded by: (1) the chairman of such meeting, (2) not less than five shareholders having the right to vote at the meeting, (3) a shareholder or shareholders representing not less than 10% of the total voting rights of all shareholders having the right to vote at the meeting, or (4) by a shareholder or shareholders holding shares in us that confer a right to vote at the meeting and on which the aggregate amount paid up is not less than 10% of the total amount paid up on all shares that confer that right.
An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of votes of those shareholders entitled to vote and voting on the matter which is the subject matter of the resolution, while a special resolution is a resolution approved by a majority of 75% of the votes of those shareholders entitled to vote and voting on the question. A special resolution will be required for matters such as amending our Constitution.
Certain Voting Requirements
Our Constitution provides that:
(a) | The following actions by our company will require a special resolution of shareholders, so long as International Finance Corporation and IFC GIF Investment Company I, together, hold at least 5% of the share capital of our company: |
(i) | amendment to the articles of association or memorandum of association of AZI and its subsidiaries, except in connection with certain Board-approved financing activities, in certain circumstances; |
(ii) | disposal or sale of more than 50% of the companys assets, or incurring obligations or liabilities worth more than 50% of our companys assets; |
(iii) | a change in the business of the company or its subsidiaries from the generation and production of solar energy; and |
(iv) | any material amendment to the ESOP plan. |
(b) | Any issuance of more than 10% of the share capital of the company, in a single transaction, must be approved by an ordinary resolution of shareholders, so long as International Finance Corporation or IFC GIF Investment Company I hold any ordinary shares of our company. |
Transfer of Equity Shares
Subject to the Mauritius Companies Act and to such restrictions contained in our Constitution as may be applicable, any shareholder may transfer all or any of his equity shares by an instrument of transfer in the usual or common or in a form prescribed by the Designated Stock Exchange (as defined in our Constitution) or in any other form which our board of directors may approve. No such instrument shall be required on the redemption of an equity share or on the purchase by us of an equity share.
Subject to the provisions of the Mauritius Companies Act, we must, on the written request of the transferor or transferee of a registered equity share in us, enter in our register of shareholders the name of the transferee of the equity share save that the registration of transfers may be suspended and the share register closed at such times and for such periods as we may from time to time by resolution of directors determine provided always that such registration shall not be suspended and the share register closed for more than thirty days in any period of twelve months.
If our board of directors declines to register a transfer it shall, within twenty eight (28) days after the date on which the instrument of transfer was lodged, send to the transferee notice of such refusal.
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Liquidation
Subject the laws of Mauritius and our Constitution, upon the winding up of us, the whole or any part of our assets shall be divided amongst the shareholders on a pro rata basis.
Redemption of Shares
Subject to the provisions of the Mauritius Companies Act and other applicable law, we may issue shares on terms that are subject to redemption, on the happening of a specified event or on a given date and/or at our option and/or at the option of the holders, on such terms and in such manner as may be determined by our board of directors.
Variation of Rights of Shares
All or any of the special rights for the time being attached to any class of shares for the time being issued may from time to time (whether or not we are being wound up) be altered or abrogated with the consent in writing of the holders of not less than 75% of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of such shares voting in person or by proxy. The necessary quorum shall be one or more persons together holding or representing by proxy not less than one-third in nominal value of the issued shares of the relevant class, that every holder of shares of the relevant class shall be entitled on a poll to one vote for every such share held by him and that any holder of shares of the relevant class present in person or by proxy may demand a poll.
The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.
Meetings of Shareholders
Subject to the Mauritius Companies Act, an annual shareholders meeting shall be convened by our board of directors not more than once in each year and not later than six months after our balance sheet date and not later than 15 months after the previous annual meeting. Special meetings of shareholders may be convened by our board of directors or on the written request of shareholders holding shares carrying together not less than 5% of the voting rights entitled to be exercised on the issue.
Subject to our Constitution, meeting of shareholders shall be called by not less than fourteen (14) nor more than sixty (60) business days notice in writing.
For a special meeting called on the written request of the shareholders, the shareholders must provide notice to our secretary which must be delivered to or mailed and received at our principal executive offices not less than ninety days nor more than one hundred twenty days prior to such special meeting.
A quorum for a meeting of shareholders shall be present where the shareholders or their proxies are present or have cast postal votes, who are between them able to exercise not less than 33.3% of the votes to be cast on the business to be transacted by the meeting.
A shareholder may exercise the right to vote either by being present in person or by proxy. A proxy for a shareholder may attend and be heard at a meeting of shareholders as if the proxy were the shareholder. A proxy shall be appointed by notice in writing signed by the shareholder, and the notice shall state whether the appointment is for a particular meeting or a specified term.
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Inspection of Books and Records
Under the Mauritius Companies Act, we are required to keep available our certificate of incorporation, Constitution, share register, the full names and residential addresses of our directors, our registered office and address for service, copies of the instruments creating or evidencing charges which are required to be registered under section 127 of the Mauritius Companies Act, minutes of all meetings and resolutions of shareholders, copies of written communications to all shareholders or to all holders of a class of shares during the preceding seven years (including financial statements, and group financial statements), certificates given by directors under the Mauritius Companies Act and our interests register (if any) for inspection by any shareholder of ours or by a person authorized in writing by a shareholder for the purpose, between the hours of 9:00 a.m. and 5:00 p.m. on each working day during the inspection period at the place at which our records are kept in Mauritius. A shareholder who wishes to inspect such records must serve written notice on us of his intention to inspect the records.
The term inspection period is defined in the Mauritius Companies Act to mean the period commencing on the third working day after the day on which notice of intention to inspect is served on us by the person.
Changes in Capital
Subject to the Mauritius Companies Act, we may, from time to time, by ordinary resolution:
(a) | divide our shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions; |
(b) | consolidate and divide all or any of our share capital into shares of larger par value than our existing shares; and |
(c) | engage in a forward stock split. |
Subject to the Mauritius Companies Act and our Constitution and any confirmation or consent required by law or under our Constitution, we may from time to time by special resolution authorize the reduction of our stated capital (including any amount in any share premium account) or change the currency denomination of our share capital as we think fit.
Purchase by Our Company of our Own Shares
We may, pursuant to a special resolution, purchase or acquire and hold our own shares as treasury shares upon such terms as our board of directors may, in our discretion, determine, provided always that such purchase or acquisition is effected in accordance with the provisions of the Mauritius Companies Act, which generally requires solvency of the company after giving effect to such purchase or acquisition.
Interested Directors
Subject to the Mauritius Companies Act and our Constitution, a director shall, forthwith after becoming aware of the fact that he is interested in a transaction or a proposed transaction with us, cause to be entered in our interests register and disclose to our board of directors the nature and monetary value of that interest, or where the monetary value of the directors interest cannot be quantified, the nature and extent of that interest. A general notice entered in the interests register or disclosed to our board of directors to the effect that a director is a shareholder, director, officer or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, is a sufficient disclosure of interest in relation to that transaction.
To the extent that our company is a reporting issuer, as defined in section 86 of the Mauritius Securities Act 2005, the relevant disclosure requirements under the Mauritius Securities Act 2005 may also be applicable. We have applied to the Mauritius Financial Services Commission for an exemption from the disclosure requirements applying to reporting issuers under the Mauritius Securities Act 2005.
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Notification of Shareholdings by Directors and Substantial Shareholders
Our Constitution provides that (a) each of our directors shall, upon his appointment to our board of directors, give an undertaking to our company that, for so long as he remains a director of our company, he shall forthwith notify our company secretary of the particulars of our equity shares beneficially owned by him at the time of his appointment and of any change in such particulars (including the circumstances of any such change), and (b) each member of our company shall, upon becoming a substantial shareholder of our company, give an undertaking to our company that, for so long as he remains as a substantial shareholder of our company, he shall notify our company secretary of the particulars of our equity shares in which he has an interest at the time of his becoming a substantial shareholder or of any change in such particulars (including the circumstances of any such change) within 48 hours of such time or change (as the case may be), provided that he shall only be required to give notice of a change in the percentage level of his interests in the shares where there is a change of 1% or more in the percentage level of his shareholding interest in the relevant class of shares in our company. For this purpose, a substantial shareholder means a person who holds by himself or his nominee a share or an interest in a share in the capital of our company which entitles him to exercise not less than 5% of the aggregate voting power exercisable at a meeting of our shareholders.
Category 1 Global Business Company
We are licensed by the Financial Services Commission as a Mauritius Category 1 Global Business Company, or GBC1.
Before the coming into force of the Mauritius Finance Act 2010, Mauritius companies holding a GBC1 were only allowed to conduct business outside Mauritius. However, with the implementation of the Mauritius Finance Act 2010, Mauritius companies holding a GBC1 may (i) carry on business in Mauritius, (ii) deal with persons resident in Mauritius, and (iii) hold shares or other interests in a corporation which is resident in Mauritius.
A Mauritius company holding a GBC1 may conduct any business activity to the extent that it is not unlawful or contrary to public interest and to the extent that it does not cause or is likely to cause serious prejudice to the good repute of Mauritius as a center for financial services.
A Mauritius company holding a GBC1 should be administered at all times by a Management Company and should be controlled and managed in Mauritius.
The following indicative list of criteria has to be complied with:
(a) | The company must have at least 2 directors, resident in Mauritius, of sufficient caliber to exercise independence of mind and judgment. |
(b) | The company will maintain at all times its principal bank account in Mauritius. |
(c) | The company will keep and maintain at all times its accounting records at its registered office in Mauritius. |
(d) | The company will prepare its statutory financial statements and cause the same to be audited in Mauritius. |
(e) | The company will provide for meetings of directors to include at least 2 directors from Mauritius. |
(f) | whether a corporation meets at least one of the following criteria: |
(i) | the corporation has or shall have office premises in Mauritius; |
(ii) | the corporation employs or shall employ on a full time basis at administrative/technical level, at least one person who shall be resident in Mauritius; |
(iii) | the corporations constitution contains a clause whereby all disputes arising out of the constitution shall be resolved by way of arbitration in Mauritius; |
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(iv) | the corporation holds or is expected to hold within the next 12 months, assets (excluding cash held in bank account or shares/interests in another corporation holding a Global Business License) which are worth at least US$100,000 in Mauritius; |
(v) | the corporations shares are listed on a securities exchange licensed by the Commission; or |
(vi) | it has or is expected to have a yearly expenditure in Mauritius which can be reasonably expected from any similar corporation which is controlled and managed from Mauritius. |
A Mauritius company holding a GBC1 is tax resident in Mauritius and can therefore benefit from the network of Double Taxation Avoidance Agreements which Mauritius has in place with a number of countries.
Differences in Corporate Law
The Mauritius Companies Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Mauritius Companies Act applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.
Pursuant to the Mauritius Companies Act, subject to certain exceptions prescribed in the Mauritius Companies Act, a Mauritius company shall not enter into the following transactions unless the transaction is approved by special resolution or contingent on approval by special resolution of the shareholders of the company:
(a) | the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than 75% of the value of the companys assets before the acquisition; |
(b) | the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than 75% of the value of the companys assets before the disposition; or |
(c) | a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities the value of which is more than 75% of the value of the companys assets before the transaction (provided that this will not apply by reason only of the company giving, or entering into an agreement to give, a charge secured over assets of the company, the value of which is more than 75% of the value of the companys assets for the purpose of securing the repayment of money or the performance of an obligation). |
Under the Mauritius Companies Act, a special resolution is a resolution that is approved by a majority of 75% of the votes of those shareholders entitled to vote and voting on the question.
Where a transaction involves the acquisition or disposition or the acquiring of rights, interests or incurring obligations of, in any case, more than half the value of the Mauritius companys assets, subject to certain exceptions prescribed in the Mauritius Companies Act, the transaction has to be approved by ordinary resolution or contingent on approval by ordinary resolution, and a Mauritius company shall not enter into the following transactions unless the transaction is approved by ordinary resolution or contingent on approval by ordinary resolution of the shareholders of the company:
(a) | the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than 50% of the value of the companys assets before the acquisition; |
(b) | the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than 50% of the value of the companys assets before the disposition; or |
(c) |
a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities the value of which is more than 50% of the value of the companys assets before the transaction (provided that this will not apply by reason only of the company giving, or |
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entering into an agreement to give, a charge secured over assets of the company, the value of which is more than 50% of the value of the companys assets for the purpose of securing the repayment of money or the performance of an obligation). |
Under the Mauritius Companies Act, an ordinary resolution is a resolution that is approved by a simple majority of the votes of those shareholders entitled to vote and voting on the matter which is the subject of the resolution.
Under Delaware law, a corporation may sell, lease or exchange all or substantially all of its property and assets upon approval by the board and resolutions adopted by holders of a majority of the outstanding shares of the corporation entitled to vote.
Mergers and Similar Arrangements
A merger of two or more constituent companies under Mauritius law requires an amalgamation proposal to be approved by the directors of each constituent company and by special resolution of the shareholders of each constituent company.
A merger between a Mauritius parent company and its Mauritius subsidiary or subsidiaries does not require approval by a resolution of shareholders. For this purpose a subsidiary has the meaning assigned to it by the Mauritius Companies Act.
Save in certain circumstances, a dissentient shareholder of a Mauritius constituent company is entitled to payment of the fair and reasonable price for his shares upon dissenting to a merger or consolidation. The exercise of appraisal rights will normally preclude the exercise of any other rights save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.
In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies where the Supreme Court of Mauritius, on the application of the company or, with leave of the court, any shareholder or creditor of the company, may order that an arrangement or amalgamation or compromise shall be binding on the company and on such other persons or classes of persons as the court may specify and any such order may be made on such terms and conditions as the court thinks fit.
Under the Delaware General Corporations Law, a merger of two Delaware corporations requires approval by the board and, except in certain circumstances, shareholders of each corporation. A merger between a Delaware parent company and its Delaware subsidiary or subsidiaries does not generally require shareholder approval.
Shareholders Suits
In principle, we will normally be the proper plaintiff, but under the Mauritius Companies Act, the Mauritius courts may grant leave to a shareholder (including a minority shareholder) to bring a derivative action.
In Delaware, in any derivative suit instituted by a shareholder of a corporation, it shall be averred in the complaint that the plaintiff was a shareholder of the corporation at the time of the transaction of which he complains or that such stockholders stock thereafter devolved upon such stockholder by operation of law. The complaint shall set forth with particularity the efforts of the plaintiff to obtain the action by the board or the reasons for not making such effort. Such action shall not be dismissed or compromised without the approval of the Chancery Court. Moreover, if we were a Delaware corporation, a shareholder whose shares were canceled in connection with our dissolution, would not be able to bring a derivative action against us after the equity shares have been cancelled.
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Indemnification of Directors and Executive Officers and Limitation of Liability
Under the Mauritius Companies Act, a company may indemnify a director or employee of the company or a related company for any costs incurred by him or the company in respect of any proceedings (a) that relates to liability for any act or omission in his capacity as a director or employee and (b) in which judgment is given in his favor, in which he is acquitted, which is discontinued, in which he is granted relief under section 350 of the Mauritius Companies Act or where proceedings are threatened and such threatened action is abandoned or not pursued. The Mauritius Companies Act further provides that a company may indemnify a director or employee of the company or a related company in respect of (a) liability to any person, other than the company or a related company, for any act or omission in his capacity as a director or employee or (b) costs incurred by that director or employee in defending or settling any claim or proceedings relating to any such liability, save in respect of any criminal liability or liability in respect of a breach (in the case of a director) of the duty to exercise his powers honestly in good faith in the best interests of the company. Our post-offering Constitution will provide for indemnification, to the extent permitted by Mauritius law, of our directors and officers for costs, charges, losses, expenses and liabilities incurred or sustained by them in the execution and discharge of their duties in their respective offices or in relation thereto, except in respect of their own fraud or dishonesty.
Under Delaware law, a corporation has the flexibility to indemnify a director, officer, employee or agent if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action, had no reasonable cause to believe the persons conduct was unlawful.
Directors Fiduciary Duties
Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director act in a manner he or she reasonably believes to be in the best interests of the corporation. He or she must not use his or her corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.
As a matter of Mauritius law, a director of a Mauritius company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes duties to the company that include a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him to do so) and a duty not to put himself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. Under the Mauritius Companies Act, our directors have a duty to our company to exercise their powers honestly, in good faith and in the best interests of our company. Our directors also have a duty to our company to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Where a director of a public company also holds office as an executive, the director is required under Mauritius law to exercise that degree of care, diligence and skill which a reasonably prudent and competent executive in that position would exercise. In fulfilling their duty of care to our company, our directors must ensure compliance with the Mauritius Companies Act and our Constitution, as amended from time to time.
Neither Mauritian law nor our Constitution requires the majority of our directors to be independent.
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Shareholder Action by Written Consent
Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Mauritius law provides that, save for the annual meeting of a company, shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held or by resolution in writing signed by not less than 75% or such other percentage as the constitution of the company may require for passing a special resolution, whichever is the greater, of the shareholders who would be entitled to vote on that resolution at a meeting of shareholders who together hold not less than 75% (or, if a higher percentage is required by the constitution, that higher percentage) of the votes entitled to be cast on that resolution.
Shareholder Meetings
Shareholders of a Delaware corporation generally do not have the right to call meetings of shareholders unless that right is granted in the certificate of incorporation or bylaws. However, if a corporation fails to hold its annual general meeting within a period of 30 days after the date designated for the annual meeting, or if no date has been designated for a period of 13 months after its last annual general meeting, the Delaware Court of Chancery may order a meeting to be held upon the application of a shareholder.
Mauritius law and our Constitution allow our shareholders to requisition a shareholders meeting. We are obliged by law to call a shareholders annual meeting once every year.
Cumulative Voting
Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporations certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholders voting power with respect to electing such director. As permitted under Mauritius law, our Constitution does not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.
Removal of Directors
Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our Constitution, directors may be removed by ordinary resolution of our shareholders.
Transactions with Interested Shareholders
The Delaware General Corporation Law contains business combination provision applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an interested shareholder for three years following the date that such person becomes an interested shareholder. Subject to specified exceptions, an interested shareholder is a person or a group that owns 15% or more of the corporations outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of 15% of more of the corporations outstanding voting stock at any time within the previous three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to
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the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the targets board of directors.
There is no such statutory provision under Mauritius law restricting transactions between a company and its significant shareholders.
Dissolution; Winding Up
Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by all shareholders entitled to vote thereon. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporations outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.
Under Mauritius law, a company may be wound up by either an order of the courts of Mauritius or by a special resolution of its members or, if the company is unable to pay its debts, by a special resolution of its members with leave of the court. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.
Under the Insolvency Act 2009 of Mauritius, our company may be dissolved, liquidated or wound up by special resolution of our shareholders.
Variation of Rights of Shares
Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Mauritius law and our Constitution, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.
Amendment of Governing Documents
Under the Delaware General Corporation Law, a corporations governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Mauritius law, our Constitution may only be amended by special resolution of our shareholders.
Rights of Non-Resident or Foreign Shareholders
There are no limitations imposed by our Constitution on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares.
Such limitations are not required under the Delaware General Corporation Law.
Issuance of Preferred Shares
Our Constitution allows for our company to issue preferred shares. Our Constitution provides that, except for issuances of more than 10% of the share capital of the Company in a single transaction, which must be approved by an ordinary resolution of shareholders for so long as International Finance Corporation or IFC GIF Investment Company I hold any ordinary shares of the Company, the directors of our company may offer, issue, grant options over or otherwise dispose of shares of our company to such persons, at such times and for such
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consideration and upon such terms and conditions as the board of directors of our company may in its absolute discretion determine (save that no shares shall be issued below the par value of the share) and that any share in our company may be issued with or have attached thereto such rights or restrictions whether in regard to dividend, voting, return of capital or otherwise as our company may determine or, if there has not been any such determination or so far as the same does not make specific provision, as the board of directors of our company may determine.
Under the Delaware General Corporation Law, a corporation may issue preferred shares without shareholder approval.
Compulsory Acquisition
The Financial Services Commission in Mauritius has recently issued the Securities (Takeover) Rules 2010, or the Rules, under the Financial Services Act 2007 of Mauritius and the Mauritius Securities Act which may apply to takeover offers where the offeree is a reporting issuer in Mauritius and to a corporation holding a global business license which is listed on a relevant securities exchange. The Rules include provisions, inter alia , for the making of a mandatory offer and compulsory acquisition of shares. The Rules came into operation on May 1, 2011.
Anti-takeover provisions
Mauritius law does not prevent Mauritius companies from adopting a wide range of defensive measures, such as staggered boards, issue of preferred shares, adoption of poison pill shareholder rights plans and provisions that restrict the rights of shareholders to call meetings. Our Constitution includes the following provisions which may be regarded as defensive measures: (i) a staggered board of directors, (ii) the ability to issue preferred shares, (iii) granting directors the absolute discretion to decline to register a transfer of any shares (other than a fully paid share), and (iv) requiring that amendments to our Constitution be approved by a special resolution of the shareholders of our company.
Delaware law also does not prevent Delaware corporations from adopting defensive measures such as staggered boards, issue of preferred shares, adoption of poison pill shareholder rights plans and requirements for advance notification of shareholder nominations and proposals. In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless certain conditions are met. Generally, a business combination includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporations outstanding voting stock.
Registration Rights
We intend to enter into a registration rights agreement by and among Azure Power Global Limited, IFC, IFC GIF Investment Company I, PROPARCO, FC VI India Venture (Mauritius) Ltd., Helion Venture Partners II, LLC, Helion Venture Partners India II, LLC and DEG (collectively referred to as the Holders), pursuant to which we will grant certain registration rights to certain holders of our Registrable Securities, as described below.
Subject to the terms of the registration rights agreement and lock-up agreements described in this prospectus, at any time or from time to time, one or more of the Holders may request that the Company effect a registration under the Securities Act of all or any part of the Registrable Securities (as will be defined in the registration rights agreement) owned by the Holders (each such registration is referred to as a Demand
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Registration), provided that the Registrable Securities to be so registered (i) have an aggregate value of at least $ , based on the closing trading price of the equity shares on the date demand to file such Demand Registration Statement is made, and (ii) include all Registrable Securities of the Holder or Holders requesting the Demand Registration which remain outstanding at such time.
At any time after the Company becomes eligible to file a shelf registration statement under the Securities Act, the registration statement to be filed by the Company pursuant to any Demand Registration may be required by the Holder requesting such Demand Registration to be in the form of a shelf registration statement (or any similar or successor form for which the Company then qualifies).
Each Holder is entitled to not more than Demand Registrations pursuant to the registration rights agreement. All Holders are entitled to no more than Demand Registrations pursuant to the registration rights agreement per year.
Whenever the Company proposes to file a registration statement including, but not limited to, registration statements relating to secondary offerings of securities of the Company (but excluding registration statements relating to the paragraphs above and relating to employee benefit plans or with respect to corporate reorganizations) at any time and from time to time, the Company will, at least 20 days prior to such filing, give written notice to all Holders of its intention to do so and, upon the written request of any Holder(s) given within 10 days after the Company provides such notice, the Company will use its reasonable efforts to cause all Registrable Securities that the Company has been requested by such Holder(s) to register or to be registered under the Securities Act to the extent necessary to permit their sale or other disposition in accordance with the intended methods of distribution specified in the request of such Holder(s), provided that the Company shall have the right to postpone or withdraw any such registration effected without obligation to any Holder.
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SHARES ELIGIBLE FOR FUTURE SALE
Following the consummation of this offering, we will have a total of equity shares issued and outstanding after giving effect to the corporate formation transactions described under Prospectus Summary Corporate Structure, assuming a total of equity shares will be issued to the non-founder investors upon the conversion of convertible securities, based on an initial public offering price of US$ per equity share, which is the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, and assuming the underwriters do not exercise their over-allotment option to purchase additional shares. All of the equity shares sold in this offering will be freely transferable by persons other than our affiliates without restriction or further registration under the Securities Act. Sales of substantial amounts of our equity shares in the public market could have a material adverse effect on the prevailing market prices of our equity shares.
While application has been made for the equity shares to be listed on the New York Stock Exchange, or NYSE, we cannot assure you that an active trading market for our equity shares will develop.
Lock-Up Agreements
All of our directors and executive officers, the selling shareholder and substantially all of our shareholders have signed lock-up agreements prior to this offering under which they have agreed not to sell, transfer or dispose of, directly or indirectly, any equity shares or any securities convertible into or exercisable or exchangeable for equity shares without the prior written consent of Barclays Capital Inc. for a period of 180 days, subject to certain exceptions and possible extension under certain circumstances, after the date of this prospectus. These agreements are described below under Underwriting.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus a person who has beneficially owned our restricted securities within the meaning of Rule 144 for at least six months is entitled to sell the restricted securities without registration under the Securities Act, subject to certain restrictions. Persons who are our affiliates may sell within any three-month period a number of restricted securities that does not exceed the greater of the following:
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1% of the number of our equity shares then outstanding, which will equal approximately shares immediately after this offering, or approximately shares if the underwriters exercise their option to purchase additional equity shares in full; and |
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The average weekly trading volume of our equity shares on the during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. |
Sales under Rule 144 by persons who are deemed our affiliates are subject to manner-of-sale provisions, notice requirements and the availability of current public information about us. Persons who are not our affiliates and have beneficially owned our restricted securities for more than six months but not more than one year may sell the restricted securities without registration under the Securities Act, subject to the availability of current public information about us. Persons who are not our affiliates and have beneficially owned our restricted securities for more than one year may freely sell the restricted securities without registration under the Securities Act.
In addition, in each case, these shares would remain subject to lock-up arrangements and would only become eligible for sale when the lock-up period expires.
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Rule 701
Beginning 90 days after the date of the prospectus, persons other than our affiliates who purchased equity shares under a written compensatory plan or contract may be entitled to sell such shares in the United States in reliance on Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell these shares in reliance on Rule 144 subject only to its manner-of-sale requirements.
Share Options
Shortly after the completion of this offering, we intend to file a registration statement on Form F-8 under the Securities Act to register all equity shares issuable under our 2015 Employee Stock Option Plan. See Management Equity-Based Compensation Plans for a description of such plan.
This Form F-8 registration statement is expected to become effective immediately upon filing, and equity shares covered by that registration statement will then be eligible for sale in the public markets, subject to:
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The Rule 144 limitations applicable to affiliates; |
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The expiration of the lock-up period; and |
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Vesting restrictions imposed by us. |
Upon consummation of the offering, there will be options outstanding to purchase fully paid equity shares pursuant to our 2015 Employee Stock Option Plan.
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The following discussion summarizes the material Mauritius, Indian and United States federal income tax consequences of an investment in our equity shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. To the extent that the discussion states specific legal conclusions under Mauritius tax law, it represents the opinion of Appleby, our special Mauritius counsel; and, to the extent it states specific legal conclusions under Indian tax law, it represents the opinion of Shardul Amarchand Mangaldas & Co., our special Indian counsel. This discussion does not deal with all possible tax consequences relating to an investment in our equity shares, such as the tax consequences under state, local, non-U.S., non-Indian and non- Mauritian tax laws.
Mauritius Taxation
We are a company holding a Mauritius Category 1 Global Business Company, or GBC1, issued by the Financial Services Commission and is a tax resident in Mauritius. The Income Tax Act 1995 of Mauritius imposes a tax in Mauritius on our chargeable income at the rate of 15%. However, under the Income Tax (Foreign Tax Credit) Regulations 1996 of Mauritius, subject to the Income Tax Act 1995 and the regulations under the Income Tax (Foreign Tax Credit) Regulations 1996, credit is allowed for foreign tax on the foreign source income of a resident of Mauritius against Mauritius tax computed by reference to the same income, and where credit is allowed against Mauritius tax chargeable in respect of any income, the amount of Mauritius tax so chargeable shall be reduced by the amount of the credit.
Under the Income Tax (Foreign Tax Credit) Regulations 1996, foreign source income means income which is not derived from Mauritius and includes in the case of a corporation holding a GBC1 under the Financial Services Act 2007 of Mauritius, income derived in the course of a global business. Subject to the provisions of the Income Tax (Foreign Tax Credit) Regulations 1996, no credit is allowed in respect of foreign tax unless written evidence is presented to the Mauritius Revenue Authority showing the amount of foreign tax which has been charged and for this purpose, written evidence includes a receipt of the relevant authorities of the foreign country for the foreign tax or any other evidence that the foreign tax has been deducted or paid to the relevant authorities of that country. However, pursuant to regulation 8 of the Income Tax (Foreign Tax Credit) Regulations 1996, if written evidence is not presented to the Mauritius Revenue Authority showing the amount of foreign tax charged on our companys foreign source income, the amount of foreign tax shall nevertheless be conclusively presumed to be equal to 80% of the Mauritius tax chargeable with respect to that income and in such circumstance, the effective tax rate in Mauritius on our chargeable income would be 3%.
Following amendments to the Financial Services Act 2007 of Mauritius pursuant to the Finance (Miscellaneous Provisions) Act 2010 in December 2010, Mauritius companies holding a GBC1 issued by the Financial Services Commission in Mauritius are permitted to conduct business both in and outside Mauritius (instead of outside Mauritius only). The operations of a GBC1 company in Mauritius will be subject to tax on chargeable income at the rate of 15% in Mauritius.
We hold tax residence certificates issued by the Mauritius Revenue Authority. These certificates are required for the avoidance of double taxation under the Agreements for the Avoidance of Double Taxation signed between Mauritius and other jurisdictions, including India.
Mauritius has no capital gains tax and has no withholding tax on the payment of dividends.
Prospective investors are urged to consult their own tax advisers in order to fully understand the tax consequences of an investment in the equity shares.
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U.S. Federal Income Taxation
The following discussion is a summary of U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the ownership and disposition of our equity shares. This summary applies only to U.S. Holders that hold the equity share as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This summary is based on U.S. tax laws in effect as of the date of this prospectus, on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this prospectus, and judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which could apply retroactively and could affect the tax consequences described below. Moreover, this summary does not address the U.S. federal estate, gift, Medicare, and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations, relating to the ownership and disposition of our equity shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:
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banks and other financial institutions; |
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insurance companies; |
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pension plans; |
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cooperatives; |
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regulated investment companies; |
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real estate investment trusts; |
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broker-dealers; |
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traders that elect to use a mark-to-market method of accounting; |
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certain former U.S. citizens or long term residents; |
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tax-exempt entities (including private foundations); |
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persons liable for alternative minimum tax; |
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persons holding equity share as part of a straddle, hedging, conversion or integrated transaction; |
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persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock; |
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persons who acquired equity share pursuant to the exercise of any employee share option or otherwise as compensation; or |
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entities taxable as partnerships for U.S. federal income tax purposes, or persons holding equity share through such entities. |
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF OUR EQUITY SHARES.
For purposes of this summary, a U.S. Holder is a beneficial owner of our equity shares that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States; |
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; |
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
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a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more United States persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
The tax treatment of a partner in any entity taxable as a partnership for U.S. federal income tax purposes that holds our equity share will depend on the status of such partner and the activities of such partnership. If you are a partner in such partnership, you should consult your tax advisors.
Dividends and Other Distributions
Subject to the passive foreign investment company, or PFIC, rules discussed below, the gross amount (in U.S. dollars) of any distribution we make to you on our equity shares (including the amount of any taxes withheld therefrom) will generally be includible in your gross income as dividend income on the date of receipt, but only to the extent that such distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Amounts not treated as dividend income for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce your tax basis in your equity share, but not below zero. Distributions in excess of our current and accumulated earnings and profits and your tax basis in your equity share will be treated as capital gain realized on the sale or other disposition of the equity share. However, we do not intend to calculate our earnings and profits under U.S. federal income tax principles. Therefore, you should expect that any distribution we make to you will be reported as a dividend even if such distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. Any dividends we pay will not be eligible for the dividends-received deduction allowed to corporations for dividends received from other U.S. corporations.
Under current law, certain non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to qualified dividend income, provided that (1) our equity shares are readily tradable on an established securities market in the United States including the NYSE, (2) we are neither a PFIC nor treated as such with respect to you for the taxable year in which the dividend is paid and the preceding taxable year and (3) certain holding period requirements are met. You should consult your tax advisors regarding the availability of the lower tax rate applicable to qualified dividend income for any dividends we pay on our equity shares, as well as the effect of any change in applicable law after the date of this prospectus.
Dividends will generally be treated as income from foreign sources for United States foreign tax credit purposes. A U.S. Holder may be eligible, subject to complex limitations, to claim a foreign tax credit with respect to any foreign withholding taxes imposed on dividends received on our equity share. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances.
Dispositions
Subject to the PFIC rules discussed below, you will generally recognize taxable capital gain or loss on any sale, exchange or other taxable disposition of an equity share equal to the difference between the amount realized (in U.S. dollars) for the equity share and your adjusted tax basis (in U.S. dollars) in the equity share. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, that has held the equity share for more than one year, you may be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any capital gain or loss will generally be treated as U.S.-source gain or loss for U.S. foreign tax credit purposes. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our equity shares, including the availability of the foreign tax credit under their particular circumstances.
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Passive Foreign Investment Company
A non-U.S. corporation will be classified as a PFIC for U.S. federal income tax purposes for any taxable year if either:
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at least 75% of its gross income for such year is passive income; or |
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at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year produce passive income or are held for the production of passive income. |
For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.
Although we are engaged in an active business and we do not generate substantial passive income relative to the revenue from our active business, the PFIC rules are complex. The determination of whether we will be or become a PFIC will depend, in part, on the composition of our income and assets. Fluctuations in the market price of our equity shares may cause us to become a PFIC for the current or subsequent taxable years because the value of assets for the purpose of the asset test may be determined by reference to the market price of our equity shares. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. Although, based on our current income and assets, we presently do not expect to be classified as a PFIC for the current taxable year and do not anticipate becoming a PFIC in future taxable years, there can be no assurance in this regard.
If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our equity shares and such U.S. Holder did not make a mark-to-market election as described below, such holder generally will be subject to special rules with respect to:
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any gain recognized by the U.S. Holder on the sale or other disposition of our equity shares; and |
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any excess distribution made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of our equity shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holders holding period for the equity shares). |
Under these rules,
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the U.S. Holders gain or excess distribution will be allocated ratably over the U.S. Holders holding period for the equity share; |
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the amount allocated to the U.S. Holders taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holders holding period before the first day of our first taxable year in which we qualified as a PFIC, will be taxed as ordinary income; |
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the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and |
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additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder. |
If we are treated as a PFIC with respect to you for any taxable year, if any of our subsidiaries are also PFICs or if we make direct or indirect equity investments in other entities that are PFICs, you will be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion that the value of the equity share you own bears to the value of all of our equity shares, and you may be subject to the rules described in the preceding two paragraphs for the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding how the PFIC rules apply to any of our subsidiaries or direct or indirect equity investments.
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If a U.S. Holder, at the close of its taxable year, owns stock in a PFIC that are treated as marketable stock for United States federal income tax purposes, the U.S. Holder may make a mark-to-market election with respect to such stock for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) our equity shares and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above with respect to its equity shares. Instead, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its equity shares at the end of its taxable year over the adjusted tax basis in its equity shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted tax basis of its equity shares over the fair market value of its equity shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holders adjusted tax basis in its equity shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the equity shares will be treated as ordinary income.
The mark-to-market election is available only for stock that are regularly traded on a national securities exchange that is registered with the SEC, including the NYSE, or on a foreign exchange or market that the Internal Revenue Service determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. Although we expect our equity shares to be listed on the NYSE, we cannot guarantee that once our equity shares are listed, they will continue to be listed and traded on the NYSE. In addition, the mark-to-market election may not be available with respect to any lower-tier PFICs unless shares of such lower-tier PFICs are themselves marketable stock. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our equity share under their particular circumstances.
Alternatively, a U.S. person that owns stock of a PFIC generally may make a qualified electing fund election regarding such corporation to elect out of the PFIC rules described above regarding excess distributions and recognized gains. We currently do not intend to prepare or provide the information that would enable you to make a qualified electing fund election.
A U.S. Holder that owns, or is deemed to own, equity shares in a PFIC during any taxable year of the U.S. Holder may have to file Internal Revenue Service Form 8621 with such U.S. Holders U.S. federal income tax return.
You should consult your tax advisors regarding how the PFIC rules apply to your investment in our equity shares and the elections and reporting requirements discussed above.
Information Reporting with Respect to Foreign Financial Assets
A U.S. Holder that owns specified foreign financial assets, including securities issued by a non-U.S. corporation, with an aggregate value in excess of US$50,000 at the end of the year (or a higher dollar amount prescribed by the Internal Revenue Service) may be required to file an information report with respect to such assets with such U.S. Holders U.S. federal income tax return, subject to certain exceptions. These rules also impose penalties if a U.S. Holder is required to submit such information to the Internal Revenue Service and fails to do so. U.S. Holders are urged to consult their tax advisors regarding the application of this legislation to their ownership of the equity shares.
Transfer Reporting Requirements
A U.S. Holder (including a U.S. tax-exempt entity) that transfers cash in exchange for equity of a newly created non-U.S. corporation may be required to file a Form 926 or a similar form with the Internal Revenue Service if (i) such person owned, directly or by attribution, immediately after the transfer at least 10% by vote or value of the corporation or (ii) if the transferred cash, when aggregated with all transfers made by such person (or
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any related person) within the preceding 12 month period, exceeds US$100,000. U.S. Holders should consult their tax advisors regarding the applicability of this requirement to their acquisition of equity shares.
Indian Taxation
The discussion contained herein is based on the applicable tax laws of India as in effect on the date hereof and is subject to possible changes in Indian law that may come into effect after such date. Prospective investors should consult their own tax advisers as to the consequences of purchasing the equity shares, including, without limitation, the consequences of the receipt of dividend and the sale, transfer or disposition of the equity shares.
Dividend payments to Azure Power Global Limited by our subsidiary, AZI, are subject to dividend distribution tax in India payable by AZI at a rate of 17.30% on the total amount distributed as a dividend as grossed up by the amount of such dividend distribution tax. Any dividend income in respect of our equity shares will not be subject to any withholding or deduction in respect of Indian income tax laws so long as our holding company is deemed to be tax resident in Mauritius.
Pursuant to amendments to the Indian Income Tax Act, 1961, as amended, income arising directly or indirectly through the transfer of a capital asset, including any share or interest in a company or entity registered or incorporated outside India, will be liable to tax in India, if such share or interest derives, directly or indirectly, its value substantially from assets (whether tangible or intangible) located in India and whether or not the seller of such share or interest has a residence, place of business, business connection, or any other presence in India. The share or interest of the company or entity registered or incorporated outside of India, shall be deemed to derive its value substantially from the assets located in India, if the value of such Indian assets exceeds Rs. 100 million, and represents at least 50% of the value of all the assets owned by the company or entity registered or incorporated outside of India. Substantially all of our assets are located in India. However, if the transferor of share or interest in a company or entity registered or incorporated outside of India (along with its associated enterprises), neither holds the right of management or control in the company or entity registered or incorporated outside of India nor holds voting power or share capital or interest exceeding 5% of the total voting power or total share capital or interest in the company or entity registered or incorporated outside of India, at any time during the twelve months preceding the date of transfer, such small shareholders are exempt from the indirect transfer provisions mentioned above.
The amendments also do not deal with the interplay between the Indian Income Tax Act, 1961, as amended, and the double taxation avoidance agreements that India has entered into with countries such as the United States, in case of an indirect transfer. Accordingly, the implications of these amendments are presently unclear. If it is determined that these amendments apply to a holder of our equity shares, such holder could be liable to pay tax in India on such income.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated in Mauritius and our primary operating subsidiary, AZI, is incorporated in India. The majority of our directors and executive officers are not residents of the United States and substantially all of our assets and the assets of such persons are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon such persons or us. In addition, you may be unable to enforce judgments obtained in courts of the United States against such persons outside the jurisdiction of their residence, including judgments predicated solely upon U.S. securities laws.
There is uncertainty as to whether the courts in Mauritius would enforce judgments obtained in the United States against us or our directors or executive officers, as well as the experts named herein, based on the civil liability provisions of the securities laws of the United States or allow actions in Mauritius against us or our directors or executive officers based only upon the securities laws of the United States. Further, foreign judgments may not be given effect to by a Mauritius court where it would be contrary to any principle affecting public policy in Mauritius or to the extent that they constitute the payment of an amount which is in the nature of a penalty and not in the nature of liquidated damages.
In addition to and irrespective of jurisdictional issues, neither Mauritian nor Indian courts will enforce a provision of the U.S. federal securities laws that is either penal in nature or contrary to public policy. An action brought pursuant to a public or penal law, the purpose of which is the enforcement of a sanction, power or right at the instance of the state in its sovereign capacity, is unlikely to be entertained by Mauritian or Indian courts. Specified remedies available under the laws of U.S. jurisdictions, including specified remedies under U.S. federal securities laws, would not be available under Mauritian or Indian law or enforceable in a Mauritian or Indian court, if they are considered to be contrary to Mauritian or Indian public policy. An award of punitive damages under a United States court judgment based upon United States federal securities laws is likely to be construed by Mauritian and Indian courts to be penal in nature and therefore unenforceable in both Mauritius and India. Further, no claim may be brought in Mauritius or India against us or our directors and officers, as well as the experts named herein, in the first instance for a violation of U.S. federal securities laws because these laws have no extraterritorial application under Mauritian or Indian law and do not have force of law in Mauritius or India.
Section 44A of the Indian Code of Civil Procedure, 1908, as amended, or the Civil Procedure Code, provides that where a foreign judgment has been rendered by a superior court in any country or territory outside of India which the Indian government has by notification declared to be a reciprocating territory, such foreign judgment may be enforced in India by proceedings in execution as if the judgment had been rendered by an appropriate court in India. However, the enforceability of such judgments is subject to the exceptions set forth in Section 13 of the Civil Procedure Code. This section, which is the statutory basis for the recognition of foreign judgments, states that a foreign judgment is conclusive as to any matter directly adjudicated upon except:
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where the judgment has not been pronounced by a court of competent jurisdiction; |
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where the judgment has not been given on the merits of the case; |
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where the judgment appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases where such law is applicable; |
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where the proceedings in which the judgment was obtained were opposed to natural justice; |
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where the judgment has been obtained by fraud; or |
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where the judgment sustains a claim founded on a breach of any law in force in India. |
Section 44A of the Civil Procedure Code is applicable only to decrees or judgments under which a sum of money is payable not being in the nature of amounts payable in respect of taxes or other charges of a similar nature or in respect of fines or other penalties and does not include arbitration awards. It is unlikely that a court in
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India would award damages on the same basis as a foreign court if an action were brought in India. Furthermore, it is unlikely that an Indian court would enforce a foreign judgment if it viewed the amount of damages awarded as excessive or inconsistent with public policy or practice in India.
If a judgment of a foreign court is not enforceable under Section 44A of the Civil Procedure Code as described above, it may be enforced in India only by a suit filed upon the judgment, subject to Section 13 of the Civil Procedure Code, and not by proceedings in execution. The United States has not been declared by the Indian government to be a reciprocating territory for the purposes of Section 44A of the Civil Procedure Code. Accordingly, a judgment of a court in the United States may be enforced only by filing a fresh suit on the basis of the judgment and not by proceedings in execution.
The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is difficult to predict whether a suit brought in an Indian court will be disposed of in a timely manner or be subject to untimely delay.
A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the Reserve Bank of India under the Foreign Exchange Management Act, 1999, as amended, to repatriate any amount recovered pursuant to such enforcement. Any judgment in a foreign currency would be converted into Indian rupees on the date of judgment and not on the date of payment.
A final and conclusive judgment in the superior courts of a foreign jurisdiction, or foreign courts, other than the courts of the United Kingdom, under which a sum of money is payable (other than a sum payable in respect of taxes, fines, penalties or similar charges) may be recognized by, and be enforceable in, the courts of Mauritius if (1) the judgment is still valid, final and is capable of execution in the jurisdiction in which it was delivered; (2) the judgment is not contrary to any principle affecting public policy in Mauritius; (3) the foreign courts had jurisdiction to hear the claim; and (4) our company had been regularly summoned to attend the proceedings before the foreign courts. Any judgment expressed in a foreign currency by a foreign court, may, when made executory in Mauritius, be expressed in that foreign currency. A valid and final judgment rendered by a court in the United States may not be enforced in Mauritius except by way of exequatur under the Mauritius Code on Civil Procedure. The exequatur may be sought in Mauritius so long as the valid and final judgment is capable of execution in the United States.
A final and conclusive judgment or order in the superior courts of the United Kingdom under which a sum of money is made payable (and including an award in proceedings on an arbitration if the award has, under the law in force in the place where it was made, become enforceable in the same manner as a judgment by a court in that place) would, on registration in accordance with the provisions of The Reciprocal Enforcement of Judgments Act 1923 be enforceable in the Supreme Court of Mauritius. Any judgment expressed in pounds sterling or other currency by a superior court of the United Kingdom, may, when made executory in Mauritius, be expressed in pounds sterling or any other currency at the rate of exchange prevailing at the date of judgment of the original court.
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Barclays Capital Inc. is acting as the sole book-running manager of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, Barclays Capital Inc. has agreed to purchase from us and the selling shareholder all the equity shares.
The underwriting agreement provides that the underwriters obligation to purchase equity shares depends on the satisfaction of the conditions contained in the underwriting agreement including:
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the obligation to purchase all of the equity shares offered hereby (other than those equity shares covered by their option to purchase additional shares as described below), if any of the shares are purchased; |
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the representations and warranties made by us and the selling shareholder to the underwriter are true; |
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there is no material change in our business or the financial markets; and |
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we and the selling shareholder deliver customary closing documents to the underwriter. |
Commissions and Expenses
The following table summarizes the underwriting discounts and commissions we and the selling shareholder will pay to the underwriter. These amounts are shown assuming both no exercise and full exercise of the underwriters option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriter pays to us and the selling shareholder for the shares.
US | Selling Shareholder | |||||||||||||||
No Exercise | Full Exercise | No Exercise | Full Exercise | |||||||||||||
Per Share |
US$ | US$ | US$ | US$ | ||||||||||||
Total |
US$ | US$ | US$ | US$ |
The representative has advised us that the underwriter proposes to offer the equity shares directly to the public at the public offering price on the cover of this prospectus and to selected dealers at such offering price less a selling concession not in excess of US$ per share.
The expenses of the offering that are payable by us are estimated to be approximately US$ (excluding underwriting discounts and commissions). We have agreed to reimburse the underwriter for certain of its expenses, in an amount of up to US$ , as set forth in the underwriting agreement.
Option to Purchase Additional Shares
We have granted the underwriter an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to an aggregate of shares from us at the public offering price less underwriting discounts and commissions. To the extent that this option is exercised, the underwriter will be obligated, subject to certain conditions, to purchase additional shares.
Lock-Up Agreements
We, all of our directors and executive officers, the selling shareholder and substantially all of our shareholders, have agreed that, for a period of 180 days after the date of this prospectus subject to certain limited exceptions, we and they will not directly or indirectly, without the prior written consent of Barclays Capital Inc., (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any equity shares (including, without limitation, equity shares that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and equity shares that may be issued upon exercise of any
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options or warrants) or securities convertible into or exercisable or exchangeable for equity shares (other than the stock and shares issued pursuant to employee benefit plans, qualified stock option plans, or other employee compensation plans existing on the date of this prospectus), or sell or grant options, rights or warrants with respect to any equity shares or securities convertible into or exchangeable for equity shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of equity shares, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of equity shares or other securities, in cash or otherwise, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any equity shares or securities convertible, exercisable or exchangeable into equity shares or any of our other securities, or (4) publicly disclose the intention to do any of the foregoing.
Barclays Capital Inc., in its sole discretion, may release the equity shares and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether or not to release equity shares and other securities from lock-up agreements, Barclays Capital Inc. will consider, among other factors, the holders reasons for requesting the release, the number of equity shares and other securities for which the release is being requested and market conditions at the time. At least three business days before the effectiveness of any release or waiver of any of the restrictions described above with respect to an officer or director of the company, Barclays Capital Inc. will notify us of the impending release or waiver and we have agreed to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver, except where the release or waiver is effected solely to permit a transfer of equity shares that is not for consideration and where the transferee has agreed in writing to be bound by the same terms as the lock-up agreements described above to the extent and for the duration that such terms remain in effect at the time of transfer.
Offering Price Determination
Prior to this offering, there has been no public market for our equity shares. The initial public offering price was negotiated among the representative, the selling shareholder and us. In determining the initial public offering price of our equity shares, the representative considered:
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the history and prospects for the industry in which we compete; |
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our financial information; |
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the ability of our management and our business potential and earning prospects; |
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the prevailing securities markets at the time of this offering; and |
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the recent market prices of, and the demand for, publicly traded shares of generally comparable companies. |
Indemnification
We and the selling shareholder have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriter may be required to make for these liabilities.
Stabilization and Short Positions
The underwriter may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the equity shares, in accordance with Regulation M under the Exchange Act:
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Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
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A short position involves a sale by the underwriter of shares in excess of the number of shares the underwriter is obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriter in excess of the number of shares it is obligated to purchase is not greater than the number of shares that it may purchase by exercising its option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in its option to purchase additional shares. The underwriter may close out any short position by either exercising its option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which it may purchase shares through its option to purchase additional shares. A naked short position is more likely to be created if the underwriter is concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
These stabilizing transactions may have the effect of raising or maintaining the market price of our equity shares or preventing or retarding a decline in the market price of the equity shares. As a result, the price of the equity shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.
Neither we, the selling shareholder nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the equity shares.
Listing on the New York Stock Exchange
We have applied to list our equity shares on the New York Stock Exchange under the symbol AZRE.
Discretionary Sales
The underwriter has informed us that it does not expect to sell more than 5% of the equity shares in the aggregate to accounts over which it exercises discretionary authority.
Stamp Taxes
If you purchase equity shares offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Other Relationships
The underwriter and certain of its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriter and certain of its affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they received or may in the future receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriter and certain of its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer or its affiliates. If the underwriter or its affiliates have a lending relationship with us, certain of those underwriter or
173
its affiliates routinely hedge, and certain other of those underwriters or their affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriter and its affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the equity shares offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the equity shares offered hereby. The underwriter and certain of its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Directed Share Program
At our request, the underwriter has reserved % of the equity shares to be issued by us and offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees, business associates and related persons. If purchased by these persons, these equity shares will be subject to a 180-day lock-up restriction. The number of equity shares available for sale to the general public will be reduced to the extent these individuals purchase such reserved equity shares. Any reserved equity shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other equity shares offered by this prospectus.
Selling Restrictions
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State) an offer to the public of any equity shares which are the subject of the offering contemplated herein may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any equity shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
|
to legal entities which are qualified investors as defined under the Prospectus Directive; |
|
by the underwriters to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or |
|
in any other circumstances falling within Article 3(2) of the Prospectus Directive, |
provided that no such offer of equity shares shall result in a requirement for us, the selling shareholder or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
Each person in a Relevant Member State who receives any communication in respect of, or who acquires any equity shares under, the offers contemplated here in this prospectus will be deemed to have represented, warranted and agreed to and with each underwriter, the selling shareholder and us that:
|
it is a qualified investor as defined under the Prospectus Directive; and |
|
in the case of any equity shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the equity shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in the circumstances in which the prior consent of the representatives of the underwriters has been given to the offer or resale or (ii) where equity shares have been acquired by it on behalf of |
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persons in any Relevant Member State other than qualified investors, the offer of such equity shares to it is not treated under the Prospectus Directive as having been made to such persons. |
For the purposes of this representation and the provision above, the expression an offer of equity shares to the public in relation to any equity shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any equity shares to be offered so as to enable an investor to decide to purchase or subscribe for the equity shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.
United Kingdom
This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000, or the FSMA), as received in connection with the issue or sale of the equity shares in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to the equity shares in, from or otherwise involving the United Kingdom.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the equity shares may only be made to persons, or the Exempt Investors, who are sophisticated investors (within the meaning of section 708(8) of the Corporations Act), professional investors (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the equity shares without disclosure to investors under Chapter 6D of the Corporations Act.
The equity shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring equity shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other
175
person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The equity shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the equity shares offered should conduct their own due diligence on the equity shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Hong Kong
The equity shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the equity shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the equity shares which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
India
This prospectus has not been and will not be registered as a prospectus with any registrar of companies in India. This prospectus has not been and will not be reviewed or approved by any regulatory authority in India, including the Securities and Exchange Board of India, any registrar of companies in India or any stock exchange in India. This prospectus and this offering of equity shares are not and should not be construed as an invitation, offer or sale of any securities to the public in India. Other than in compliance with the private placement exemptions under applicable laws and regulations in India, including the Companies Act, 2013, as amended, our equity shares have not been, and will not be, offered or sold to the public or any member of the public in India. This prospectus is strictly personal to the recipient and neither this prospectus nor the offering of our equity shares is calculated to result, directly or indirectly, in our equity shares becoming available for subscription or purchase by persons other than those receiving the invitation or offer. Each investor is deemed to have acknowledged, represented and agreed that it is eligible to invest in our company and our equity shares under applicable laws, rules and regulations in India, without the requirement to obtain any prior approval, and that it is not prohibited or prevented under any law, rule or regulation in India from acquiring, owning or selling our equity shares.
Japan
The equity shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, Japanese Person shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our equity shares may not be circulated or distributed, nor may our
176
shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (2) to a relevant person or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where our equity shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor; shares, debentures and units of shares and debentures of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not transferred within six months after that corporation or that trust has acquired the shares under Section 275 of the SFA, except: (1) to an institutional investor (for corporations under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by operation of law.
Switzerland
The equity shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the equity shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the company, the equity shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of equity shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA and the offer of equity shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of equity shares.
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EXPENSES RELATING TO THIS OFFERING
The following table sets forth the estimated costs and expenses, other than the underwriting discounts and commissions, payable by us in connection with the offering (all amounts are estimated except the SEC registration fee and the FINRA filing fee):
SEC registration fee |
US$ | 11,620 | ||
FINRA filing fee |
US$ | 14,850 | ||
Listing fee |
* | |||
Printing expenses |
* | |||
Legal fees and expenses |
* | |||
Accounting fees and expenses |
* | |||
Miscellaneous |
* | |||
|
|
|||
Total |
* | |||
|
|
* | To be provided by amendment. |
178
Certain legal matters as to United States federal and New York law in connection with this offering will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, California. The validity of the equity shares offered in this offering and certain legal matters as to Mauritius law will be passed upon for us by Appleby, Port Louis, Mauritius. Certain legal matters as to Indian law will be passed upon for us by Shardul Amarchand Mangaldas & Co, New Delhi, India. Skadden, Arps, Slate, Meagher & Flom LLP may rely upon Appleby with respect to matters governed by Mauritius law and upon Shardul Amarchand Mangaldas & Co with respect to matters governed by Indian law. Certain legal matter will be passed on for the underwriters by Latham & Watkins LLP, New York, New York.
The consolidated financial statements of Azure Power Global Limited at March 31, 2014 and 2015 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young Associates LLP, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-1 under the Securities Act with respect to the equity shares to be sold in this offering. This prospectus, which forms a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. You should refer to the registration statement for further information. Statements contained in this prospectus as to the content of any contract or other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or document.
Upon declaration by the SEC of the effectiveness of the registration statement, we will become subject to the periodic reporting and other informational requirements of the Exchange Act applicable to a foreign private issuer. Under the Exchange Act, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC can be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. You may also obtain additional information over the Internet at the SECs website at www.sec.gov.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
Consolidated Financial Statements |
||||
F-2 | ||||
F-3 | ||||
Consolidated Statements of Operations for the years ended March 31, 2014 and 2015 |
F-4 | |||
Consolidated Statements of Comprehensive Loss for the years ended March 31, 2014 and 2015 |
F-5 | |||
F-6 | ||||
Consolidated Statements of Cash Flows for the years ended March 31, 2014 and 2015 |
F-8 | |||
F-9 | ||||
Condensed Consolidated Financial Statements |
||||
Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2015 (Unaudited) |
F-44 | |||
F-45 | ||||
F-46 | ||||
F-47 | ||||
F-48 | ||||
Notes to Condensed Consolidated Financial Statements (Unaudited) |
F-49 |
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Azure Power Global Limited
We have audited the accompanying consolidated balance sheets of Azure Power Global Limited as of March 31, 2014 and 2015, and the related consolidated statements of operations, comprehensive loss, preferred shares and shareholders deficit and cash flows for each of the two years in the period ended March 31, 2015. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Azure Power Global Limited at March 31, 2014 and 2015, and the consolidated result of its operations and its cash flows for each of the two years in the period ended March 31, 2015, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young Associates LLP
Gurgaon, India
March 1, 2016
F-2
AZURE POWER GLOBAL LIMITED
Rs. and US$ amounts in thousands, except share and par value data
As on March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
(Note 2(d)) | ||||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
1,599,067 | 2,044,290 | 30,885 | |||||||||
Restricted cash |
60,000 | 702,407 | 10,612 | |||||||||
Accounts receivable, net |
166,226 | 237,956 | 3,595 | |||||||||
Deferred income tax asset |
| 22,453 | 339 | |||||||||
Deferred IPO cost |
| 88,400 | 1,336 | |||||||||
Prepaid expenses and other current assets# |
122,398 | 240,730 | 3,637 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets |
1,947,691 | 3,336,236 | 50,404 | |||||||||
Restricted cash |
618,674 | 600,794 | 9,077 | |||||||||
Property, plant and equipment, net |
6,033,617 | 15,145,674 | 228,821 | |||||||||
Software, net |
5,332 | 15,720 | 238 | |||||||||
Deferred income taxes |
69,394 | 4,460 | 67 | |||||||||
Other assets* # |
599,445 | 820,824 | 12,401 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
9,274,153 | 19,923,708 | 301,008 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities, preferred shares and shareholders deficit |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable |
16,656 | 971,467 | 14,677 | |||||||||
Current portion of long-term debt |
1,909,456 | 2,254,344 | 34,059 | |||||||||
Income taxes payable |
11,296 | 115,945 | 1,751 | |||||||||
Deferred income taxes |
28,802 | 998 | 15 | |||||||||
Interest payable |
32,472 | 55,879 | 844 | |||||||||
Other liabilities |
44,596 | 274,268 | 4,144 | |||||||||
|
|
|
|
|
|
|||||||
Total current liabilities |
2,043,278 | 3,672,901 | 55,490 | |||||||||
Long-term debt |
7,111,393 | 15,478,509 | 233,850 | |||||||||
Deferred revenue |
232,403 | 317,702 | 4,800 | |||||||||
Deferred income taxes |
71,196 | 117,661 | 1,778 | |||||||||
Asset retirement obligations |
33,350 | 70,942 | 1,072 | |||||||||
Other liabilities |
6,266 | 18,630 | 281 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
9,497,886 | 19,676,345 | 297,271 | |||||||||
|
|
|
|
|
|
|||||||
Preferred shares, Rs. 10 par value; 534,044 and 672,177 shares designated as compulsorily convertible preferred shares as of March 31, 2014 and 2015 respectively, (liquidation preference excluding dividend distribution tax is Rs. 5,176,368 as of March 31, 2015) |
2,385,725 | 4,689,942 | 70,856 | |||||||||
Shareholders deficit |
||||||||||||
Equity shares, US$0.01 par value; 109,830 shares issued and outstanding |
68 | 68 | 1 | |||||||||
Additional paid-in capital |
(894,401 | ) | (1,642,112 | ) | (24,809 | ) | ||||||
Accumulated deficit |
(1,745,307 | ) | (2,828,302 | ) | (42,730 | ) | ||||||
Accumulated other comprehensive income |
20,012 | 23,192 | 350 | |||||||||
|
|
|
|
|
|
|||||||
Total APGL shareholders deficit |
(2,619,628 | ) | (4,447,154 | ) | (67,188 | ) | ||||||
Non-controlling interest |
10,170 | 4,575 | 69 | |||||||||
|
|
|
|
|
|
|||||||
Total shareholders deficit |
(2,609,458 | ) | (4,442,579 | ) | (67,119 | ) | ||||||
|
|
|
|
|
|
|||||||
Total liabilities, preferred shares and shareholders deficit |
9,274,153 | 19,923,708 | 301,008 | |||||||||
|
|
|
|
|
|
# | Includes security deposit of Rs. 6,300 and Rs. 6,300 (US$95) to related parties as of March 31, 2014 and 2015, classified as current and non-current respectively, also see Note 18. |
* | Includes loan of Rs. 41,392 to a related party as of March 31, 2014, also see Note 18. |
See accompanying notes.
F-3
AZURE POWER GLOBAL LIMITED
Consolidated Statement of Operations
Rs. and US$ amounts in thousands, except share and per share data
Year ended March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
(Note 2(d)) | ||||||||||||
Operating revenues: |
||||||||||||
Sale of power |
881,345 | 1,124,138 | 16,984 | |||||||||
Operating costs and expenses: |
||||||||||||
Cost of operations (exclusive of depreciation and amortization shown separately below) |
52,491 | 79,816 | 1,206 | |||||||||
General and administrative expenses |
235,300 | 425,952 | 6,435 | |||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | |||||||||
|
|
|
|
|
|
|||||||
Total operating cost and expenses |
540,143 | 828,198 | 12,512 | |||||||||
|
|
|
|
|
|
|||||||
Operating income |
341,202 | 295,940 | 4,472 | |||||||||
Other expense: |
||||||||||||
Interest expense, net |
520,219 | 831,790 | 12,567 | |||||||||
Loss on foreign currency exchange, net |
580,566 | 299,628 | 4,527 | |||||||||
|
|
|
|
|
|
|||||||
Total other expenses |
1,100,785 | 1,131,418 | 17,094 | |||||||||
|
|
|
|
|
|
|||||||
Loss before income taxes |
(759,583 | ) | (835,478 | ) | (12,622 | ) | ||||||
Income tax expense |
(15,847 | ) | (253,112 | ) | (3,824 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | ||||||
Net loss attributable to non-controlling interest |
(26,935 | ) | (5,595 | ) | (85 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss attributable to APGL |
(748,495 | ) | (1,082,995 | ) | (16,361 | ) | ||||||
Accretion on Mezzanine CCPS |
(366,552 | ) | (755,207 | ) | (11,410 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss attributable to APGL equity shareholders |
(1,115,047 | ) | (1,838,202 | ) | (27,771 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss per share attributable to APGL equity shareholders |
||||||||||||
Basic and diluted |
(10,241 | ) | (16,737 | ) | (253 | ) | ||||||
Shares used in computing basic and diluted per share amounts |
||||||||||||
Equity shares |
108,882 | 109,830 | | |||||||||
Pro forma (unaudited)(1): |
||||||||||||
Pro forma net loss |
||||||||||||
Pro forma net loss attributable to non-controlling interest |
||||||||||||
Pro forma net loss attributable to APGL equity shareholders |
||||||||||||
Pro forma basic and diluted loss per share |
||||||||||||
Pro forma shares used in computing basic and diluted per share amounts |
(1) | The pro forma disclosures for the year ended March 31, 2015 reflect the conversion of all outstanding compulsorily convertible debentures (Note 10) and compulsorily convertible preferred shares (Notes 10 and 14) into equity shares before the Initial Public Offering. |
The pro forma disclosure will be completed once the equity shares upon conversion can be determined. For pro forma disclosure purposes, these conversions are assumed to have occurred as of the beginning of the fiscal year.
See accompanying notes.
F-4
AZURE POWER GLOBAL LIMITED
Consolidated Statement of Comprehensive Loss
Rs. and US$ amounts in thousands
Year ended March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
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(Note 2(d)) | ||||||||||||
Net loss attributable to APGL equity shareholders |
(1,115,047 | ) | (1,838,202 | ) | (27,772 | ) | ||||||
Add: Non-controlling interest |
(26,935 | ) | (5,595 | ) | (85 | ) | ||||||
Other comprehensive loss: |
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Foreign currency translation |
13,844 | (3,180 | ) | (48 | ) | |||||||
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Total comprehensive loss attributable to APGL equity shareholders |
(1,128,138 | ) | (1,846,977 | ) | (27,905 | ) | ||||||
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See accompanying notes.
F-5
AZURE POWER GLOBAL LIMITED
Consolidated Statement of Preferred Shares and Shareholders Deficit
Rs. and US$ amounts in thousands
Preferred
shares |
Equity
shares |
Additional
paid in capital |
Accumulated
other comprehensive income |
Accumulated
deficit |
Total APGL
shareholders deficit |
Non-
controlling interests |
Total
shareholders deficit |
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Balance as of March 31, 2013 |
2,019,173 | 68 | (532,268 | ) | 6,168 | (996,812 | ) | (1,522,844 | ) | 37,105 | (1,485,739 | ) | ||||||||||||||||||||
Net loss |
| | | | (748,495 | ) | (748,495 | ) | (26,935 | ) | (775,430 | ) | ||||||||||||||||||||
Accretion on Mezzanine CCPS |
366,552 | | (366,552 | ) | | | (366,552 | ) | | (366,552 | ) | |||||||||||||||||||||
Other comprehensive loss |
| | | 13,844 | | 13,844 | | 13,844 | ||||||||||||||||||||||||
Share based compensation |
| | 4,419 | | | 4,419 | | 4,419 | ||||||||||||||||||||||||
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Balance as of March 31, 2014 |
2,385,725 | 68 | (894,401 | ) | 20,012 | (1,745,307 | ) | (2,619,628 | ) | 10,170 | (2,609,458 | ) | ||||||||||||||||||||
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See accompanying notes.
F-6
AZURE POWER GLOBAL LIMITED
Consolidated Statement of Preferred Shares and Shareholders Deficit
Rs. and US$ amounts in thousands
Preferred
shares |
Equity
shares |
Additional
paid in capital |
Accumulated
other comprehensive income |
Accumulated
deficit |
Total APGL
shareholders deficit |
Non-
controlling interests |
Total
shareholders deficit |
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Balance as of March 31, 2014 |
2,385,725 | 68 | (894,401 | ) | 20,012 | (1,745,307 | ) | (2,619,628 | ) | 10,170 | (2,609,458 | ) | ||||||||||||||||||||
Proceeds from issue of shares to founders |
| | 68 | | | 68 | | 68 | ||||||||||||||||||||||||
Issuance of series F CCPS |
1,549,010 | | | | | | | | ||||||||||||||||||||||||
Net loss |
| | | | (1,082,995 | ) | (1,082,995 | ) | (5,595 | ) | (1,088,590 | ) | ||||||||||||||||||||
Accretion on Mezzanine CCPS |
755,207 | | (755,207 | ) | | | (755,207 | ) | | (755,207 | ) | |||||||||||||||||||||
Other comprehensive loss |
| | | 3,180 | | 3,180 | | 3,180 | ||||||||||||||||||||||||
Share based compensation |
| | 7,428 | | | 7,428 | | 7,428 | ||||||||||||||||||||||||
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Balance as of March 31, 2015 |
4,689,942 | 68 | (1,642,112 | ) | 23,192 | (2,828,302 | ) | (4,447,154 | ) | 4,575 | (4,442,579 | ) | ||||||||||||||||||||
Balance as of March 31, 2015 (US$) |
70,856 | 1 | (24,809 | ) | 350 | (42,730 | ) | (67,188 | ) | 69 | (67,119 | ) |
See accompanying notes.
F-7
AZURE POWER GLOBAL LIMITED
Consolidated Statement of Cash Flows
Rs. and US$ amounts in thousands
Year ended March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
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(Note 2(d)) | ||||||||||||
Cash flows from operating activities |
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Net loss |
(775,430 | ) | (1,088,590 | ) | (16,446 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
Deferred income taxes |
(19,528 | ) | 61,179 | 924 | ||||||||
Depreciation and amortization |
252,352 | 322,430 | 4,871 | |||||||||
Change in fair value of CCDs and Series E CCPS |
190,300 | 286,300 | 4,325 | |||||||||
Loss on disposal of property, plant and equipment |
5,869 | 5,416 | 82 | |||||||||
Share based compensation |
4,419 | 7,428 | 112 | |||||||||
Amortization of debt financing costs |
15,330 | 22,090 | 334 | |||||||||
Realized gain on short term investments |
(13,060 | ) | (13,949 | ) | (211 | ) | ||||||
Deferred rent |
365 | 12,170 | 184 | |||||||||
Allowance for doubtful accounts |
253 | 947 | 14 | |||||||||
Loss on foreign currency exchange, net |
580,566 | 299,628 | 4,527 | |||||||||
Changes in operating assets and liabilities |
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Accounts receivable |
(35,962 | ) | (72,677 | ) | (1,098 | ) | ||||||
Prepaid expenses and other current assets |
(2,047 | ) | (118,332 | ) | (1,788 | ) | ||||||
Other assets |
(177,866 | ) | (241,077 | ) | (3,642 | ) | ||||||
Accounts payable |
(29,133 | ) | (102,863 | ) | (1,553 | ) | ||||||
Interest payable |
4,431 | 23,407 | 354 | |||||||||
Deferred revenue |
86,297 | 85,299 | 1,289 | |||||||||
Other liabilities |
(110,557 | ) | 334,514 | 5,054 | ||||||||
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Net cash flows used in operating activities |
(23,401 | ) | (176,680 | ) | (2,668 | ) | ||||||
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Cash flows from investing activities |
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Purchase of property, plant and equipment |
(372,317 | ) | (8,426,008 | ) | (127,300 | ) | ||||||
Purchase of software |
(5,464 | ) | (14,408 | ) | (218 | ) | ||||||
Purchase of available for sale investments |
(1,076,837 | ) | (913,991 | ) | (13,809 | ) | ||||||
Sale of available for sale investments |
1,089,897 | 927,940 | 14,019 | |||||||||
Redemption/ maturity (purchase) of term deposits- restricted cash |
350,295 | (624,527 | ) | (9,435 | ) | |||||||
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Net cash flows used in investing activities |
(14,426 | ) | (9,050,994 | ) | (136,743 | ) | ||||||
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Cash flows from financing activities |
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Proceeds from issuance of Series F CCPS |
| 1,549,010 | 23,402 | |||||||||
Proceeds from issuance of equity shares to founders and investors |
44 | 68 | 1 | |||||||||
Repayments of term and other loan |
(409,417 | ) | (452,920 | ) | (6,843 | ) | ||||||
Proceeds from term and other loan |
977,278 | 8,398,976 | 126,892 | |||||||||
Proceeds from issuance of Series E CCPS |
491,400 | | | |||||||||
IPO Cost incurred |
| (3,045 | ) | (46 | ) | |||||||
Proceeds from issuance of CCDs |
| 180,000 | 2,719 | |||||||||
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Net cash flows provided by financing activities |
1,059,305 | 9,672,089 | 146,125 | |||||||||
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Effect of exchange rate changes on cash and cash equivalents |
2,657 | 788 | 12 | |||||||||
Net increase (decrease) in cash and cash equivalents |
1,024,135 | 445,223 | 6,715 | |||||||||
Cash and cash equivalents at beginning of the year |
574,932 | 1,599,067 | 24,159 | |||||||||
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Cash and cash equivalents at end of the year |
1,599,067 | 2,044,290 | 30,885 | |||||||||
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Supplemental disclosure of cash flow information |
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Cash paid during the year for interest |
406,921 | 844,586 | 12,760 | |||||||||
Cash paid during the year for income taxes |
131,831 | 230,383 | 3,481 |
F-8
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
1. | (a) Organization |
Azure Power Global Limited (APGL or Azure) organized under the laws of Mauritius and its subsidiaries (collectively, the Company) located out of India (except for two U.S. subsidiaries) are engaged in the development, construction, ownership, operation, maintenance and management of solar power plants and generation of solar energy based on long-term contracts (power purchase agreements or PPA) with Indian government energy distribution companies as well as other non-governmental energy distribution companies and commercial customers.
(b) Formation and initial public offering (IPO)
Prior to the formation of Azure Power Global Limited (APGL) and the reorganization described below, the Companys operations were entirely conducted through Azure Power India Private Limited (AZI) and its subsidiaries. AZI is a company organized under the laws of India. APGL was formed to enable the consummation of the transactions described below and this IPO.
Pursuant to a shareholders agreement on July 22, 2015 between APGL, the non-founder investors in AZI and the founders (the APGL SHA), APGL purchased from the non-founder investors in AZI the equity shares and convertible securities in the form of Compulsorily Convertible Debentures (CCDS) and Compulsorily Convertible Preferred Shares (CCPS) held by them in AZI for an equivalent number of equity shares, CCDS and CCPS in APGL on substantially similar terms as those formerly held in AZI (the Reorganization).
Prior to the Reorganization, the non-founder investors had an 86% ownership interest, on an as converted basis (excluding the CCDS and CCPS which convert into a variable and currently indeterminable number of equity shares), in AZI with the balance held by the AZI founders. Subsequent to the Reorganization, APGL held an 86% interest in AZI, on an as converted basis, with the balance remaining with the founders of AZI. As a result of the Reorganization, the non-founder investors also held an 86% ownership interest in APGL, on an as converted basis, with the balance held by the founders. As of the date hereof, APGL hold approximately 94% of AZI on an as converted basis.
On July 22, 2015, APGL, AZI and the founders entered into another shareholders agreement (the AZI SHA), which provides that it is the intention of all parties to the AZI SHA to eventually make AZI a wholly owned subsidiary of APGL. As such, pursuant to the AZI SHA, APGL has an indefinite option requiring the AZI founders to sell their shareholding in AZI to APGL at the minimum applicable price as per Indian law. In addition, the AZI SHA prohibits a transfer of AZI equity shares held by the founders without the consent of APGL. Furthermore, the AZI founders and the non-founder investors entered into a Sponsor Lock-in Agreement (Lock-in Agreement) whereby the APGL founders cannot dispose of their shares in APGL to the extent of value of their shareholding in AZI until the occurrence of a termination event, as defined, including if the IPO of APGL is not completed by December 31, 2015. Any excess return earned by the founders upon disposal of their shareholding above the face value plus taxes incurred on transfer of such shares is to be distributed among the founders and non-founders pro rata based on their as converted shareholding in APGL, provided a termination event has not occurred. The non-founder investors and founders have agreed in principle to extend the lock in period, including the period for sharing the excess returns till the completion of APGLs IPO.
The APGL SHA, AZI SHA and their combined effect, including the call option and the Lock-In Agreement, replicated the founders and the non-founder investors interests in AZI in APGL on a substantially cash neutral basis and without any gain/loss by one party at the expense of another party. To reflect the economic substance of the APGL SHA, the AZI SHA and the Reorganization, the Company has prepared the consolidated financial statements as though it had been combined with AZI since the earliest period presented, using the pooling of
F-9
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
interests method of accounting with the assets and liabilities of the entities recorded at their historical carrying values. Similarly, no value has been attributed to the non-controlling interest still held by the AZI founders in AZI.
2. Summary of significant accounting policies
a) | Basis of presentation |
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and are presented in Indian rupees (Rs.), unless otherwise stated. The consolidated financial statements include the accounts of APGL and companies which are directly or indirectly controlled by APGL. All intercompany accounts and transactions have been eliminated upon consolidation.
b) | Use of estimates |
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, expenses and comprehensive loss that are reported and disclosed in the consolidated financial statements and accompanying notes. These estimates are based on managements best knowledge of current events, historical experience, actions the Company may undertake in the future and on various other assumptions that are believed to be prudent and reasonable under the circumstances. Significant estimates and assumptions are used for, but not limited to impairment of and useful lives of property, plant and equipment, determination of asset retirement obligations, valuation of derivative instruments, valuation of share based compensation, valuation of compulsorily convertible debentures and preferred shares, income taxes, and other contingencies and commitments. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates, and such differences may be material to the consolidated financial statements.
c) | Foreign currency translation and transactions |
The functional currency of the Company is the United States Dollar (US$) and reporting currency of the Company is Indian rupees (Rs.). APGLs subsidiaries with operations in India and the United States use their respective currencies as their functional currencies. The financial statements of APGL and its subsidiaries, other than the subsidiaries with functional currency of Rs., are translated into Rs. other than the subsidiaries with the functional currency of Rs. using the exchange rate as of the balance sheet date for assets and liabilities and average exchange rate for the year for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders equity.
In the financial statements of the Companys subsidiaries, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in the determination of net income or loss during the year in which they occur.
Revenue, expense and cash flow items are translated using the average exchange rates for the respective year. The resulting gains and losses from such translation are excluded from the determination of earnings and are recognized instead in accumulated other comprehensive loss, which is a separate component of shareholders deficit.
F-10
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Realized and unrealized foreign currency transaction gains and losses, arising from exchange rate fluctuations on balances denominated in currencies other than the functional currency of an entity, such as those resulting from the Companys US dollar (US$) denominated borrowings, are included in Loss on foreign currency exchange, net in the consolidated statements of operations.
d) | Convenience translation |
Translation of balances in the consolidated balance sheets and the consolidated statements of operations, comprehensive loss, preferred shares and shareholders deficit and cash flows from Rs. into US$, as of and for the year ended March 31, 2015 are solely for the convenience of the readers and were calculated at the rate of US$1 = Rs. 66.19, the noon buying rate in New York City for cable transfers in non U.S. currencies, as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2015. No representation is made that the Rs. amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2015, or at any other rate.
e) | Cash and cash equivalents |
Cash and cash equivalents include cash on hand, demand deposits with banks, term deposits and all other highly liquid investments purchased with an original maturity of three months or less at the date of acquisition and that are readily convertible to cash. The Company has classified term deposits totaling Rs. 561,050 and Rs. 95,416 (US$1,441) at March 31, 2014 and 2015 respectively as cash and cash equivalents, because the Company has the ability to redeem these deposits at any time subject to an immaterial interest rate forfeiture. All term deposits are readily convertible into known amount of cash with no more than one days notice.
f) | Restricted cash |
Restricted cash consists of cash balances restricted as to withdrawal or usage and relates to cash used to collateralize bank letters of credit supporting the purchase of equipment for solar power plants, bank guarantees issued in relation to the construction of the solar power plants within the timelines stipulated in PPAs and for certain debt service reserves required under the Companys loan agreements. Restricted cash is classified into current and non-current portions based on the term of the deposit and the expiration date of the underlying restriction.
g) | Investments |
Management determines the appropriate classification of investment securities at the time of purchase and re-evaluates such designation at each balance sheet date. The investment securities held by the Company during the periods presented in the accompanying consolidated financial statements are classified as available-for-sale (short-term investments) and consist of liquid mutual funds units.
The Company accounts for its investments in accordance with Financial Accounting Standards Board (FASB) ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities . These investments are considered available for sale and are recorded at fair value, with the unrealized gains or losses, net of tax, reported as a component of accumulated other comprehensive loss in the consolidated statement of shareholders deficit. As of March 31, 2014 and 2015, the Company did not have any short-term investments. Realized gains and proceeds from the sale of available-for-sale securities for the year ended March 31, 2014 were Rs. 13,060 and Rs. 1,089,897 and for the year ended March 31, 2015 were Rs. 13,949 (US$211) and Rs. 927,940 (US$14,019), respectively.
F-11
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Realized gains and losses and decline in value judged to be other than temporary on available-for-sale securities are included in the consolidated statements of operations. The cost of securities sold or disposed is determined on First in First out, or FIFO method.
h) | Accounts receivable |
The Companys accounts receivables are generated by selling energy to customers and are reported net of any allowance for uncollectible accounts. The allowance for doubtful accounts is based on various factors, including the length of time receivables are past due, significant one-time events, the financial health of customers and historical experience. Accounts receivable serve as collateral for borrowings under the working capital facility, described in Note 10.
i) | Deferred IPO cost |
The Company incurred legal and printing costs relating to its planned IPO of Rs. 88,400 (US$1,336) as of March 31, 2015. The Company accounts for such costs under ASC 340-10-599-1 (SAB Topic 5A) Expenses of the Offering as incremental costs directly attributable to an offering of equity shares and has capitalized such costs on its condensed consolidated balance sheet. These costs will be applied against the proceeds from the IPO, when received.
j) | Property, plant and equipment |
Property, plant and equipment represents the costs of completed and operational solar power plants, as well as the cost of furniture and fixtures, vehicles, office and computer equipment, leasehold improvements, freehold land and construction in progress. Construction in progress represents the accumulated cost of solar power plants that have not been placed into service at the date of the balance sheet. Construction in progress includes the cost of solar modules for which the Company has taken legal title, civil engineering, electrical and other related costs incurred during the construction of a solar power plant. Construction in progress is reclassified to property, plant and equipment when the project begins its commercial operations.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the assets estimated useful lives as follows:
Plant and machinery (solar power plants) |
25 years | |||
Furniture and fixtures |
5 years | |||
Vehicles |
5 years | |||
Office equipment |
5 years | |||
Computers |
3 years |
Leasehold improvements to office facilities are depreciated over the shorter of the lease period or the estimated useful life of the improvement. Leasehold improvements on the solar power plant sites are depreciated over the shorter of the lease term or the remaining period of the PPAs undertaken with the respective customer. Freehold land is not depreciated. Construction in progress is not depreciated until it is ready to be put to use.
Improvements to property, plant and equipment deemed to extend the useful economic life of an asset are capitalized. Maintenance and repairs that do not improve efficiency or extend the estimated economic life of an asset are expensed as incurred.
F-12
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Capitalized interest
Interest incurred on funds borrowed to finance construction of solar power plants is capitalized until the plant is ready for its intended use. Capitalized interest during the year ended March 31, 2014 was not significant. Capitalized interest during the year ended March 31, 2015 was Rs. 155,012 (US$2,342).
k) | Accounting for impairment of long-lived assets |
The Company periodically evaluates whether events have occurred that would require revision of the remaining useful life of property, plant and equipment and improvements, or render their carrying value not recoverable. If such circumstances arise, the Company uses an estimate of the undiscounted value of expected future operating cash flows to determine whether the long-lived assets are impaired. If the aggregate undiscounted cash flows are less than the carrying amount of the assets, the resulting impairment charge to be recorded is calculated based on the excess of the carrying value of the assets over the fair value of such assets, with the fair value determined based on an estimate of discounted future cash flows, appraisals or other valuation techniques. There were no impairment charges related to long-lived assets recognized during the years ended March 31, 2014 and 2015.
l) | Leases and land use rights |
The Companys leases relate to leasehold land on which the solar power plants are constructed and for office facilities. Leases are reviewed for capital or operating classification at their inception under the guidance of ASC Topic 840 Leases . The expense for leases classified as operating leases is recorded as rent expense on a straight-line basis, over the lease term, beginning with the date the Company has access to the property.
Land use rights represent lease prepayments to the lessor. Land use rights are carried at cost less accumulated amortization. Amortization is provided to write off the cost of lease prepayments on a straight-line basis over the period of the lease or PPA, whichever is lower.
The Company did not have any capital leases during any of the periods presented in the accompanying consolidated financial statements.
m) | Asset retirement obligations (ARO) |
Upon the expiration of a PPA or, if later, the expiration of the lease agreement for solar power plants located on leasehold land, the Company is required to remove the solar power plant and restore the land. The Company records the fair value of the liability for the legal obligation to retire the asset in the period in which the obligation is incurred, which is generally when the asset is constructed. When a new liability is recognized, the Company capitalizes it by increasing the carrying amount of the related long-lived asset, which resulting ARO asset is depreciated over the remaining useful life of the solar power plant. The liability is accreted and expensed to its present expected future value each period based on a credit adjusted risk free interest rate. Upon settlement of the obligation, the Company eliminates the liability and, based on the actual cost to retire, may incur a gain or loss. The Companys asset retirement obligations for the year ended March 31, 2014 and 2015 are as follows.
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
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Beginning balance |
15,000 | 33,350 | 504 | |||||||||
Addition during the period |
17,000 | 35,000 | 528 | |||||||||
Liabilities settled during the period |
| | | |||||||||
Accretion during the period |
1,350 | 2,592 | 40 | |||||||||
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Ending balance |
33,350 | 70,942 | 1,072 | |||||||||
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F-13
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
n) | Software |
The Company capitalizes certain internal software development costs under the provisions of ASC Topic 350-40 Internal-Use Software . As of March 31, 2014 and 2015, the amount capitalized as software includes the cost of software licenses, as well as related implementation costs, which primarily relate to third party consulting fees. Such license and implementation costs are capitalized and amortized over their estimated useful lives of three years using the straight-line method. On an ongoing basis, the Company assesses the recoverability of its capitalized software intangible assets. Capitalized software costs determined to be unrecoverable are expensed in the period in which the determination is made. As of March 31, 2014 and 2015, all capitalized software was considered fully recoverable.
o) | Debt financing costs |
Financing costs incurred in connection with obtaining construction and term financing loans are deferred and amortized over the term of the respective loan using the effective interest rate method. Amortization of debt financing costs is capitalized during construction and recorded as interest expense in the consolidated statements of operations following commencement of commercial operations of the respective solar power plants.
Amortization of debt financing costs for the years ended March 31, 2014 and 2015 was Rs. 15,330 and Rs. 22,090 (US$334), respectively.
p) | Income taxes |
Income taxes are recorded under the asset and liability method, as prescribed under ASC Topic 740 Income Taxes , whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The Company establishes valuation allowances against its deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized.
The Company applies a two-step approach to recognize and measure uncertainty in income taxes in accordance with FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes an interpretation of ASC Topic 740 . The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. Through March 31, 2015 the Company does not have any unrecognized tax benefits nor has it recognized any interest or penalties.
q) | Employee benefits |
Defined contribution plan
Eligible employees of the Company in India receive benefits from the Provident Fund, administered by the Government of India, which is a defined contribution plan. Both the employees and the Company make monthly contributions to the Provident Fund equal to a specified percentage of the eligible employees salary.
F-14
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
The Company has no further funding obligation under the Provident Fund, beyond the contributions elected or required to be made thereunder. Contributions to the Provident Fund by the Company are charged to expense in the period in which services are rendered by the covered employees and amounted to Rs. 3,015 and Rs. 5,693 (US$86) for the years ended March 31, 2014 and 2015, respectively.
Defined benefit plan
Employees in India are entitled to benefits under the Gratuity Act, a defined benefit post-employment plan covering eligible employees of the Company. This plan provides for a lump-sum payment to eligible employees at retirement, death, and incapacitation or on termination of employment, of an amount based on the respective employees salary and tenure of employment. As of March 31, 2015, this plan is unfunded.
Current service costs for defined benefit plans are accrued in the period to which they relate. In accordance with ASC Topic 715, Compensation Retirement Benefit , the liability in respect of defined benefit plans is calculated annually by the Company using the projected unit credit method and amounted to Rs. 4,855 and Rs. 5,612 (US$85) as of March 31, 2014 and 2015, respectively. Prior service cost, if any, resulting from an amendment to a plan is recognized and amortized over the remaining period of service of the covered employees. Interest costs as of March 31, 2014 and 2015 was not significant.
The Company recognizes its liabilities for compensated absences in accordance with ASC Topic 710, Compensation General . The Company accrues the liability for its employee rights to compensated absence in the year in which it is earned.
r) | Revenue recognition |
Revenue from sale of power is recognized when persuasive evidence of an arrangement exists, the fee is fixed or determinable, solar energy kilowatts are supplied and collectability is reasonably assured. Revenue is based on the solar energy kilowatts actually supplied to customers multiplied by the rate per kilo-watt hour agreed to in the respective PPAs. The solar energy kilowatts supplied by the Company are validated by the customer prior to billing and recognition of revenue.
Where PPAs include scheduled price changes, revenue is recognized by applying the average rate to the energy output estimated over the term of the PPA. The Company estimates the total kilowatt hour units expected to be generated over the entire term of the PPA. The contractual rates are applied to this annual estimate to determine the total estimated revenue over the term of the PPA. The Company then uses the total estimated revenue and the total estimated kilo-watt hours to compute the average rate used to record revenue on the actual energy output supplied. The Company compares the actual energy supplied to the estimate of the energy expected to be generated over the remaining term of the PPA on a periodic basis, but at least annually. Based on this evaluation, the Company reassesses the energy output estimated over the remaining term of the PPA and adjusts the revenue recognized and deferred to date. Through March 31, 2015, the adjustments have not been significant. The difference between actual billing and revenue recognized is recorded as deferred revenue.
For the year ended March 31, 2014 and 2015, the amount of revenue recognized under the PPAs with scheduled price changes is Rs.165,461 and Rs. 175,492 (US$2,651), respectively.
Revenue from sale of power is recorded net of discounts. Through March 31, 2015, discounts have not been significant.
F-15
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
s) | Cost of operations (exclusive of depreciation and amortization) |
The Companys cost of operations consists of expenses pertaining to operations and maintenance of its solar power plants. These expenses include payroll and related costs for maintenance staff, plant maintenance, insurance, and lease costs.
Depreciation expense is not included in cost of operations but is included within Depreciation and amortization expense, shown separately in the consolidated statements of operations.
t) | General and administrative expenses |
General and administrative expenses include payroll and related costs for corporate, finance and other support staff, including bonus and share based compensation expense, professional fees and other corporate expenses.
u) | Share based compensation |
The Company follows guidance under ASC Topic 718, Compensation Stock Compensation , which requires compensation costs related to share-based transactions, including employee share options, to be recognized in the financial statements based on their fair value. The Company recognizes compensation expense for share options net of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation is included in general and administrative expenses and recognized in the consolidated statements of operations for the years ended March 31, 2014 and 2015 based on awards ultimately expected to vest.
The Company has elected to use the Black-Scholes-Merton valuation model to determine the fair value of share-based awards on the date of grant for employee share options with a fixed exercise price and fixed service-based vesting.
The Company has elected to use the Lattice valuation model to determine the fair value of share-based awards on the date of grant for employee share options with a market vesting condition.
v) | Contingencies |
Liabilities for loss contingencies arising from claims, tax assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred with respect to these items are expensed as incurred.
w) | Fair value of financial instruments |
ASC Topic 820, Fair Value Measurements and Disclosures , defines fair value as the price at which an asset could be exchanged or a liability transferred in an orderly transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or derived from such prices. Where observable prices or inputs are not available, other inputs and valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity.
F-16
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
x) | Derivative instruments |
Derivative instruments are recorded on the consolidated balance sheets at fair value. Changes in fair value of derivatives not designated as accounting hedges are reported directly in earnings along with the corresponding transaction gains and losses on the items being hedged. The Company enters into foreign exchange currency contracts to mitigate and manage the risk of changes in foreign exchange rates. These foreign exchange derivative contracts were entered into to hedge the fluctuations in foreign exchange rates for recognized balance sheet items such as the Companys U.S. dollar denominated borrowings and are not designated as hedges for accounting purposes. Realized gains (losses) and changes in the fair value of these foreign exchange derivative contracts are recorded in foreign exchange gains (losses), net in the consolidated statements of operations. These derivatives are not held for speculative or trading purposes. The Company did not have any derivatives designated as accounting hedges during the years ended March 31, 2014 and 2015.
y) | Segment information |
Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Companys chief executive officer is the chief operating decision maker. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that it has a single operating and reporting segment: Sale of power. The Companys principal operations, revenue and decision-making functions are located in India.
z) | Non-controlling interest |
The non-controlling interest recorded in the financial statements relates to a 20% ownership in a subsidiary (10MW Gujarat Power Plant) not held by the Company. As of March 31, 2014, the Company recorded a non-controlling interest amounting to Rs. 10,170, including Rs. 26,935 of net loss for the year then ended. As of March 31, 2015, the Company recorded a non-controlling interest amounting to Rs. 4,575 (US$69), including Rs. 5,595 (US$88) of net loss for the year then ended.
aa) | Recent accounting pronouncements |
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition , and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity is required to follow five steps which comprises of (a) identifying the contract(s) with a customer; (b) identifying the performance obligations in the contract; (c) determining the transaction price; (d) allocating the transaction price to the performance obligations in the contract and (e) recognizing revenue when (or as) the entity satisfies a performance obligation. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, under either retrospective or retrospective with cumulative effect adoption. Early application is not permitted. The Company is currently assessing the potential effects of these changes to its consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12 Stock Compensation Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After the
F-17
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Requisite Service Period which requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The ASU clarifies the proper method of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The guidance is effective for annual and interim periods for fiscal years beginning on or after December 15, 2015. Entities can apply the amendment either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The Company is currently assessing the potential effects of these changes to its consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15 Presentation of Financial Statements Going Concern which requires an entitys management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entitys ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued. The ASU defines and clarifies that substantial doubt exists when conditions and events indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date financial statements are issued or available to be issued. The ASU requires management to perform the assessment every interim and annual period. The ASU applies to all entities and is effective for the annual period ending after December 15, 2016. Early application is permitted, but has not been chosen by the Company. The Company is currently assessing the impact of adopting this standard.
In January 2015, the FASB issued ASU No. 2015-01 Income Statement Extraordinary and Unusual Items which simplifies the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. The ASU applies to all entities and is effective for the annual period beginning on or after December 15, 2015. The Company has not classified any transactions as extraordinary or unusual to date.
In February 2015, the FASB issued Accounting Standards Update No. 2015-03InterestImputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Cost which requires the discount or premium and debt issuance costs to be reported in the balance sheet as a direct deduction from the face amount of debt liability. Further amortization of such costs shall be reported as interest expense. The amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015. The Company is currently assessing the impact of the presentation change per the ASU and no estimate of the impact is currently available.
In February 2015, the FASB issued ASU No. 2015-02 Consolidation Amendments to the Consolidation Analysis which modifies the existing consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination, and (iv) certain investment funds The ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2015. The ASU is not presently expected to have an impact on the Companys consolidated financial statements as the Company does not currently have any stake in such entities.
In August 2015, FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements (ASU No. 2015-15). This ASU indicates that the guidance in ASU No. 2015-03 did not address presentation or subsequent measurement of debt issuance costs
F-18
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
related to line of credit arrangements. Given the absence of authoritative guidance within ASU No. 2015-03, the SEC staff has indicated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of credit arrangement. The Company does not expect the adoption of ASU No. 2015-15 to have any effect on the Companys financial position or results of operations.
In November 2015, FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This guidance requires entities to classify deferred tax liabilities and assets as noncurrent in a classified statement of financial position. The guidance is effective for interim and annual periods beginning after December 15, 2016, and may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is evaluating the potential effects of these changes to its consolidated financial statements.
3. Cash and cash equivalents
Cash and cash equivalents consist of the following:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Bank demand deposits |
1,037,969 | 1,948,823 | 29,443 | |||||||||
Term deposits |
561,050 | 95,416 | 1,441 | |||||||||
Cash on hand |
48 | 51 | 1 | |||||||||
|
|
|
|
|
|
|||||||
Total |
1,599,067 | 2,044,290 | 30,885 | |||||||||
|
|
|
|
|
|
4. Restricted cash
Restricted cash consists of the following:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Bank demand deposits |
378,220 | 542,484 | 8,196 | |||||||||
Term deposits |
300,454 | 760,717 | 11,493 | |||||||||
|
|
|
|
|
|
|||||||
678,674 | 1,303,201 | 19,689 | ||||||||||
Restricted cash current |
60,000 | 702,407 | 10,612 | |||||||||
|
|
|
|
|
|
|||||||
Restricted cash non-current balance |
618,674 | 600,794 | 9,077 | |||||||||
|
|
|
|
|
|
The increase in the restricted cash balance from March 31, 2014 to March 31, 2015 is primarily the result of increases in debt service reserve requirements, resulting from the increase in the level of the Companys borrowings during the period as well as cash used as collateral for letter of credit, resulting from increase in the level of solar power plant construction at March 31, 2015 compared to the prior period end.
F-19
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
5. Accounts receivable
Accounts receivable, net consists of the following:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Accounts receivable |
175,279 | 247,956 | 3,746 | |||||||||
Less: Allowance for doubtful accounts |
(9,053 | ) | (10,000 | ) | (151 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
166,226 | 237,956 | 3,595 | |||||||||
|
|
|
|
|
|
Activity for the allowance for doubtful accounts receivable is as follows:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Balance at the beginning of the year |
8,800 | 9,053 | 137 | |||||||||
Provision for doubtful accounts |
253 | 947 | 14 | |||||||||
|
|
|
|
|
|
|||||||
Balance at the end of the year |
9,053 | 10,000 | 151 | |||||||||
|
|
|
|
|
|
6. Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of the following:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Prepaid income taxes |
29,346 | 69,207 | 1,046 | |||||||||
Security deposit to related party (Note 18) |
6,300 | | | |||||||||
Derivative instruments (Note 21) |
25,135 | 75,750 | 1,144 | |||||||||
Debt financing costs |
21,799 | 35,973 | 543 | |||||||||
Interest receivable on term deposits |
24,689 | 10,537 | 159 | |||||||||
Other |
15,129 | 49,263 | 745 | |||||||||
|
|
|
|
|
|
|||||||
Total |
122,398 | 240,730 | 3,637 | |||||||||
|
|
|
|
|
|
F-20
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
7. Property, plant and equipment, net
Property, plant and equipment, net consists of the following:
Estimated
useful life (in years) |
As of March 31, | |||||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||||||
Plant and machinery (solar power plants) |
25 | 5,901,781 | 8,793,975 | 132,860 | ||||||||||||
Furniture and fixtures |
5 | 4,442 | 4,791 | 72 | ||||||||||||
Vehicles |
5 | 9,632 | 10,274 | 155 | ||||||||||||
Office equipment |
5 | 2,847 | 5,083 | 77 | ||||||||||||
Computers |
3 | 5,762 | 12,595 | 190 | ||||||||||||
Leasehold improvements solar power plant |
25 | 361,386 | 639,765 | 9,666 | ||||||||||||
Leasehold improvements office |
1-3 | 3,572 | 11,738 | 177 | ||||||||||||
|
|
|
|
|
|
|||||||||||
6,289,422 | 9,478,221 | 143,197 | ||||||||||||||
Accumulated depreciation |
452,411 | 770,821 | 11,645 | |||||||||||||
|
|
|
|
|
|
|||||||||||
5,837,011 | 8,707,400 | 131,552 | ||||||||||||||
Freehold land |
39,260 | 199,173 | 3,009 | |||||||||||||
Construction in progress |
157,346 | 6,239,101 | 94,260 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total |
6,033,617 | 15,145,674 | 228,821 | |||||||||||||
|
|
|
|
|
|
Depreciation expense on property, plant and equipment was Rs. 252,065 and Rs. 318,411 (US$ 4,811) for the years ended March 31, 2014 and 2015, respectively.
8. Software, net consists of the following:
Estimated
useful life (in years) |
As of March 31, | |||||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||||||
Software licenses and related implementation costs |
3 | 6,261 | 20,668 | 312 | ||||||||||||
Less: Accumulated amortization |
929 | 4,948 | 74 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total |
5,332 | 15,720 | 238 | |||||||||||||
|
|
|
|
|
|
Aggregate amortization expense for software was Rs. 287 and Rs. 4,019 (US$61) for the years ended March 31, 2014 and 2015, respectively.
Estimated amortization expense is: Rs. 6,488 in 2016, Rs. 6,488 in 2017 and Rs. 2,744 in 2018
F-21
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
9. Other assets
Other assets consist of the following:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Prepaid income taxes |
126,185 | 232,347 | 3,510 | |||||||||
Custom duty receivable |
30,742 | 30,742 | 464 | |||||||||
Loan to related party (Note 18) |
41,392 | | | |||||||||
Derivative instruments (Note 21) |
202,669 | 158,338 | 2,392 | |||||||||
Debt financing costs |
165,880 | 242,622 | 3,666 | |||||||||
Interest receivable on term deposits |
25,435 | 53,989 | 816 | |||||||||
Security deposit to related party (Refer Note 18) |
| 6,300 | 95 | |||||||||
Land use rights |
| 79,500 | 1,201 | |||||||||
Other |
7,142 | 16,986 | 257 | |||||||||
|
|
|
|
|
|
|||||||
Total |
599,445 | 820,824 | 12,401 | |||||||||
|
|
|
|
|
|
10. Long term debt
Long term debt consists of the following:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Compulsorily convertible debentures 5.0 % DEG |
9,65,800 | 1,080,100 | 16,318 | |||||||||
Compulsorily convertible debentures 10.0 % IFC |
362,900 | 391,500 | 5,915 | |||||||||
Compulsorily convertible debentures 0% IFC II |
100,100 | 116,100 | 1,754 | |||||||||
Compulsorily convertible debentures 5% IFC III |
| 210,900 | 3,186 | |||||||||
Series E compulsorily convertible preferred shares (140,000 preferred shares) |
566,100 | 662,600 | 10,011 | |||||||||
|
|
|
|
|
|
|||||||
1,994,900 | 2,461,200 | 37,184 | ||||||||||
Project-level secured term loans: |
||||||||||||
Foreign currency loans |
6,186,577 | 6,046,900 | 91,357 | |||||||||
Indian rupee loans |
838,505 | 9,224,518 | 139,364 | |||||||||
|
|
|
|
|
|
|||||||
7,025,082 | 15,271,418 | 230,721 | ||||||||||
Other secured bank loans: |
||||||||||||
Vehicle loans |
867 | 235 | 4 | |||||||||
|
|
|
|
|
|
|||||||
9,020,849 | 17,732,853 | 267,908 | ||||||||||
Less current portion |
1,909,456 | 2,254,344 | 34,059 | |||||||||
|
|
|
|
|
|
|||||||
Long-term debt |
7,111,393 | 15,478,509 | 233,850 | |||||||||
|
|
|
|
|
|
Compulsory Convertible Debentures (CCDs)
The CCDs are convertible to equity with a term of 10 years from the respective issuance dates and the holders of the CCD have the option at their discretion to convert to equity shares at the time of the Qualified
F-22
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Initial Public Offering (QIPO) date of February 25, 2016 (liquidity event). Considering the tenure of these CCDs and restrictions under Indian Companies Act, 2013 on quantum of permitted buy back, these CCDs have been classified as non-current liabilities.
The face value of the DEG, IFC, IFC II and IFC III CCDs is Rs. 680,390, Rs. 246,620, Rs. 75,000, and Rs. 180,000, respectively. The CCDs each contain the following key terms and conditions.
Voting
The holders of the CCDs are not entitled to voting rights other than for certain specific matters based on their proportionate voting right as defined and specified in the shareholder and CCD agreements.
Term
Unless converted, the DEG, IFC IFC II and IFC III CCDs mature 10 years from the date of the respective issuance being November 10, 2021, December 14, 2020, January 3, 2023 and June 5, 2024, respectively.
Interest
The DEG CCDs bear interest at a rate of 5.0% per annum through the date of their conversion into equity shares of the Company. The first interest payment is eighteen months from the issuance date followed by quarterly payments until the earlier of the date of conversion or maturity.
The IFC CCDs bear interest at a rate of 10.0% per annum through the date of their conversion into equity shares of the Company. The first interest payment is eighteen months from the issuance date followed by quarterly payments until the earlier of the date of conversion or maturity.
The IFC II CCDs do not carry an annual interest rate. However, if any dividends are paid to equity shareholders or the holders of the Compulsorily Convertible Preferred Shares (CCPS), the IFC II holders are entitled to interest/dividends equal to the return provided to the equity shareholders or the CCPS shareholders, whichever is higher.
The IFC III CCDs bear interest at a rate of 5.0% per annum through the date of their conversion into equity shares of the Company. The first interest payment is eighteen months from the issuance date followed by quarterly payments until the earlier of the date of conversion or maturity.
The CCDs convert at a price such that the holder earns an internal rate of return ranging from 18.4% to 20.0% upon the filing of a draft red herring prospectus (DRHP), pursuant to the Indian Companies Act, 2013, as defined, in the event of liquidation events, as defined, or upon the voluntary sale of shares by all shareholders. Otherwise the guaranteed internal rate of return to the CCD holders ranges from 16.0% to 18.0% at maturity.
Buyback obligation
At any time after the expiry of the Qualified Initial Public Offering (QIPO) date of February 25, 2016, upon a breach of the funding requirements of the CCD holders or upon the occurrence of a liquidation event, as defined, the holders of the CCDs have an option, at their discretion, to require the Company to buyback the equity shares held by them after the conversion of their CCDs into equity shares so as to give them their required returns ranging from 18.4% to 20.0%.
F-23
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Until March 31, 2015, these debentures were held by Azure Power India Private Limited. Indian rules and regulations place limitations on the amount of the CCDs the Company can buy back within 12 months of the balance sheet. Among other things, the Company is restricted from buying back an amount of shares in excess of 25% of its statutory paid up share capital and free reserves in a year. As of March 31, 2015, the Company has estimated that a maximum aggregate amount totalling Rs. 986,084 of the CCDs are eligible for redemption by February 25, 2016 and has accordingly classified this amount as a current liability.
Conversion
The CCDs compulsorily convert to equity shares (a) upon filing of the DRHP, (b) in connection with an IPO as approved by the shareholders of the Company, or (c) at the maturity date of the respective CCDs. The CCDs are convertible into equity shares so as to give the holders their guaranteed returns ranging from 16.0% to 18.0%.
Accounting
In accordance with ASC Topic 480 Distinguishing liabilities from equity, the CCDs are recorded at their respective fair values at period end. The fair value has been determined based on a discounted cash flow analysis under the income approach. Changes in the fair value are recorded as interest expense in the statements of operations. The carrying amount of the CCDs includes the unrealized changes in the fair value of Rs. 426,790 and Rs. 616,590 (US$9,315) as of March 31, 2014 and 2015, respectively. Issuance costs on the CCDs are expensed as incurred. Interest expense, including changes to fair value, on the CCDs for the years ended March 31, 2014 and 2015 was Rs. 217,751 and Rs. 248,831 (US$3,759), respectively.
Series E Compulsorily Convertible Preferred Shares (Series E CCPS)
Series E CCPS contain the following key terms and conditions, as amended.
Voting
The holders of the Series E CCPS are not entitled to voting rights other than for certain specific matters based on their proportionate voting right as defined and specified in the shareholder and the Series E CCPS agreements.
Term
Unless converted, the Series E CCPS are redeemable twenty years from the date of their respective allotment or April 18, 2033.
Dividend
Each of the Series E CCPS holders are entitled to a 5.0% per share non-cumulative dividend declared and paid in accordance with the Indian Companies Act of 2013. Should the equity or the Series A, B, C, D or F CCPS holder in any financial year receive a dividend payout higher than 5% of the amount invested by such investors, the Series E CCPS holders are entitled to receive an additional dividend equal to the difference between the percentage return earned by the equity or the Series A, B, C, D or F CCPS holders and the rate of dividends received by the Series E CCPS holders. The Company has not declared or paid any dividends through March 31, 2015.
F-24
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Until March 31, 2015, these debentures were held by Azure Power India Private Limited. Indian rules and regulations place limitations on the amount of the CCPS the Company can buy back within 12 months of the balance sheet. Among other things, the Company is restricted from buying back an amount of shares in excess of 25% of its statutory paid up share capital and free reserves in a year. As of March 31, 2015, the Company has estimated that the CCPS will not be eligible for buyback by February 25, 2016 and therefore continues to classify the CCPS as a non-current liability.
Buyback obligation
At any time after the expiry of the QIPO date of February 25, 2016, or if the funding covenants of the Series E CCPS are breached, the Series E CCPS holders have an option, at their discretion, to require the Company to buyback the equity shares held by them after conversion of the Series E CCPS into equity shares so as to give them a required return of 15.0%.
Conversion
The Series E CCPS compulsorily convert to equity shares (a) upon filing of the DRHP, (b) in connection with an IPO as approved by the shareholders of the Company, or (c) at their maturity date. The Series E CCPS are convertible into equity shares so as to give the holders their required return which is 15% if converted at maturity or 17% upon the filing of a DRHP or of a QIPO.
Liquidation
On the occurrence of a liquidation event, as defined in the term of the Series E CCPS agreement, the Series E CCPS holders have the right to receive an amount equal to their original investment plus a guaranteed internal rate of return of 17.0%. At March 31, 2015, the Series E CCPS liquidation preference was Rs. 672,631 (US$10,162).
Accounting
In accordance with ASC Topic 480 , the Series E CCPS are classified as a liability and recorded at their respective fair values at period end. The fair value has been determined based on a discounted cash flow analysis under the income approach. Changes in the fair value are recorded as interest expense in the statements of operations. The carrying amount of Series E CCPS includes the unrealized changes in the fair value of 74,700 and Rs. 96,500 (US$1,458) as of March 31, 2014 and March 31, 2015 respectively. Issuance costs on the CCPS are expensed as incurred.
Project level secured term loans
Foreign currency loans
From June 2009 through September 2009 the Company borrowed Rs. 309,631 (US$6,230) for the financing of a 2 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 48 equal quarterly installments which commenced on December 15, 2010. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 325,634 (US$4,920) as of March 31, 2015.
From February 2011 through June 2011, the Company borrowed Rs. 1,233,084 (US$26,835) for the financing of a 10 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 54 equal quarterly installments which commenced on September 15, 2012. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,190,739 (US$17,990) as of March 31, 2015.
F-25
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
From October 2011 through March 2012, the Company borrowed Rs. 782,793 (US$15,777) for the financing of a 5 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 66 quarterly installments which commenced on July 15, 2012. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 682,449 (US$10,310) as of March 31, 2015.
From October 2012 through June 2013, the Company borrowed Rs. 3,503,984 (US$63,709) for the financing of a 35 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 36 semi-annual installments which commenced on August 20, 2013. The borrowing is collateralized by underlying solar power project assets with a net carrying value of Rs. 3,188,626 (US$48,174) as of March 31, 2015.
In September 2014, the Company entered into a credit facility for financing future solar power projects. The total amount of the facility is US$20,000. The interest rate for the facility is fixed at base rate plus 2.25% at the time of first disbursement. The tenure of the facility is 10 years from the date of first disbursement. During the period, no amounts have been drawn from the facility and the Company has deferred financing cost of Rs. 7,186 (US$109) in relation to this facility.
The fixed interest foreign currency loans carry an interest rate ranging from 4.07% to 6.43% per annum.
The carrying value of the foreign currency loans includes unrealized foreign exchange losses of Rs. 878,803 and Rs. 1,161,739 (US$17,552) as of March 31, 2014 and 2015, respectively.
The Company is required to maintain principal and interest, both as defined in the respective agreements, as a form of collateral with banks specified by the respective lenders. Such amounts, totaling Rs. 397,884 (US$6,011) as of March 31, 2015, are classified as restricted cash on the consolidated balance sheets.
The foreign currency loans are subject to certain financial and non-financial covenants. As of March 31, 2014, the Company was not in compliance with certain of these covenants and accordingly the Company had classified the respective loans totaling Rs. 1,668,952 as current liability. On April 14, 2015, the Company received a waiver from the lender regarding all past breaches of these loan covenants, as a result of which, the aforementioned loans have been classified as non-current as of March 31, 2015. Further, the lender has relaxed the compliances to certain financial covenants upto April 01, 2016. As of March 31, 2015, the Company is in compliance with all such covenants.
Indian rupee loans
In December 2013, the Company borrowed Rs. 143,740 for the financing of a 2.5 MW solar power project, which carries an interest rate of 12.16% to be periodically revised by the lender. The interest rate as of March 31, 2015 was 12.16% and the weighted interest rate for the year ended March 31, 2015 was 12.16%. The loan is repayable in 29 semi-annual installments which commenced on January 15, 2014. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 155,260 (US$2,346) as of March 31, 2015.
In March 2014, the Company borrowed Rs. 103,677 for financing of a 1.5 MW solar rooftop power project, which loan carries interest rate at a base rate, as defined, plus 2.25%. The floating interest rate as of March 31, 2015 was 12.50% and the weighted average interest rate for the year ended March 31, 2015 was 12.50%. The loan is repayable in 54 quarterly installments commencing on March 28, 2015. The borrowing is collateralized by the underlying solar rooftop power project assets with a net carrying value of Rs. 108,127 (US$1,634) as of March 31, 2015.
F-26
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
From March 2014 through September 2014, the Company borrowed Rs. 1,880,000 for financing of a 34 MW solar power project, which borrowings carry a floating rate of interest at a base rate as defined plus 2.25%. The floating interest rate as of March 31, 2015 was 12.65% and the weighted interest rate for the year ended March 31, 2015 was 12.62%. The loan is repayable in 58 equal quarterly installments commencing July 1, 2015. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,942,482 (US$29,347) as of March 31, 2015.
In September 2014, the Company borrowed Rs. 550,000 for financing of a 10 MW solar power project, which borrowings carry a floating rate of interest at a base rate as defined plus 2.25%. The floating interest rate as of March 31, 2015 was 12.75% and the weighted interest rate for the year ended March 31, 2015 was 12.75%. The loan is repayable in 44 quarterly installments commencing January 27, 2016. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 583,226 (US$8,811) as of March 31, 2015.
From November 2014 through January 2015, the Company borrowed Rs. 585,000 for financing of a 10 MW solar power project, which borrowings carry a floating rate of interest to be periodically revised by the lender. The floating interest rate as of March 31, 2015 was 12.75% and the weighted interest rate for the year ended March 31, 2015 was 12.75%. The loan is repayable in 58 quarterly installments commencing January 17, 2016. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 624,582 (US$9,436) as of March 31, 2015.
From January 2015 through March 2015, the Company borrowed Rs. 1,000,000 for financing of a 30 MW solar power project, which borrowings carry a floating rate of interest at a base rate plus 1.8%. The interest rate as of March 31, 2015 was 14% and the weighted interest rate for the year ended March 31, 2015 was 14%. The loan is repayable from other borrowings to be arranged by the Company from other lenders or at the end of 18 months from the date of disbursement, whichever is earlier. The borrowing is collateralized by the underlying solar power project assets under construction with a net carrying value of Rs. 771,759 (US$11,600) as of March 31, 2015.
From December 2014 through March 2015, the Company borrowed Rs. 1,794,200 for financing of a 40 MW solar power project, which borrowings carry a floating rate of interest which will reset after every 2 years from the date of commissioning. The interest rate as of March 31, 2015 from consortium of lenders was in the range of 11.76% to 12.65% floating with additional 1% interest during construction period and the weighted interest rate for the year ended March 31, 2015 was 12.19%. The loan is repayable in half yearly installments commencing October 15, 2015. The borrowing is collateralized by the underlying solar power project assets under construction with a net carrying value of Rs. 2,145,201 (US$32,409) as of March 31, 2015.
From December 2014 through March 2015, the Company borrowed Rs. 2,123,629 for financing of a 40 MW solar power project, which borrowings carry a floating rate of interest which will reset after every 2 years from the date of commissioning. The interest rate as of March 31, 2015 from consortium of lenders was 12.65% floating with additional 1% interest during construction period and the weighted interest rate for the year ended March 31, 2015 was 13.65%. The loan is repayable in quarterly installments commencing May 31, 2016. The borrowing is collateralized by the underlying solar power project assets under construction with a net carrying value of Rs. 1,858,109 (US$28,072) as of March 31, 2015.
From December 2014 through March 2015, the Company borrowed Rs. 1,063,400 for financing of a 20 MW solar power project, which borrowings carry a floating rate of interest which will reset after every 2 years from the date of commissioning. The interest rate as of March 31, 2015 from consortium of lenders was 12.65% floating with additional 1% interest during construction period and the weighted interest rate for the year ended
F-27
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
March 31, 2015 was 13.65%. The loan is repayable in quarterly installments commencing May 31, 2016. The borrowing is collateralized by the underlying solar power project assets under construction with a net carrying value of Rs. 1,132,254 (US$17,106) as of March 31, 2015.
As of March 31, 2015, the Company has unused commitments for long-term financing arrangements amounting to Rs. 1,105,357 (US$16,670) for a 40MW, 40 MW, 20 MW and 30 MW solar power projects.
The Indian rupee loans are subject to certain financial and non-financial covenants. As of March 31, 2015, the Company is in compliance with all such covenants.
From time to time, the Company in required to maintain principal and interest, both as defined in the respective agreements, as a form of collateral with banks specified by the respective lenders. . Such amounts, totaling Rs. 144,600 (US$2,185) as of March 31, 2015, are classified as restricted cash on the consolidated balance sheets.
For certain of the Indian rupee loans, two directors of the Company have provided personal guarantees in favor of the lenders and have also pledged part of their shareholding with these lenders.
Working Capital Facility
In September 2013, AZI entered into a Rs. 500,000 credit facility with a non-banking finance company expiring in September 2015. This credit facility bears interest at a rate of 14.0% which can be reset periodically by the lender. Borrowings under this credit facility are repayable within 12 months of the disbursement and are collateralized by the assets created from the respective disbursement. This credit facility contains non-financial covenants, including cross default breach provisions with the Companys foreign currency borrowings. At March 31, 2015, the Company was in compliance with all covenants under this facility. Two directors of the Company have given personal guarantees and have pledged a portion of their shareholding to the lender. As of March 31, 2014 and 2015, there were no borrowings or amounts outstanding under the working capital facility.
As of March 31, 2015, the aggregate maturities of long term debt (excluding CCDs and Series E CCPS) are as follows:
March 31, |
Annual maturities | |||
2016 |
1,266,344 | |||
2017 |
1,758,377 | |||
2018 |
917,482 | |||
2019 |
952,456 | |||
2020 |
996,639 | |||
Thereafter |
9,380,355 | |||
|
|
|||
Total |
15,271,653 | |||
|
|
11. Income Taxes
The individual entities within the Company file individual tax returns as per the regulations existing in their respective jurisdictions.
The fiscal year under the Indian Income Tax Act ends on March 31. A portion of the Companys Indian operations qualify for deduction from taxable income because its profits are attributable to undertakings engaged in development of solar power projects under section 80-IA of the Indian Income Tax Act, 1961. This holiday is
F-28
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
available for a period of ten consecutive years out of fifteen years beginning from the year in which the Company generates power (Tax Holiday Period). The Company anticipates that it will claim the aforesaid deduction in the last ten years out of fifteen years beginning with the year in which the Company generates power and when it has taxable income. Accordingly, its current operations are taxable at the normally applicable tax rates.
Due to the Tax Holiday Period, a substantial portion of the temporary differences between the book and tax basis of the Companys assets and liabilities do not have any tax consequences as they are expected to reverse within the Tax Holiday Period.
AZI and a subsidiary provide services to other group subsidiaries and incur income taxes on profits from these services. These services are capitalizable by the subsidiaries and are hence capitalized as part of property, plant and equipment in the standalone financial statements of such subsidiaries and deducted in their respective income tax return in the form of depreciation expense. However, these capitalized costs are eliminated in the Companys consolidated financial statements. AZI treats the income tax it incurs on the provision of such services to its subsidiaries as prepaid income taxes to the extent the amounts are expected to be deductible by the subsidiaries in their tax returns outside of the Tax Holiday Period.
Income (loss) before income taxes is as follows:
Year ended, March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Domestic operations |
(774,851 | ) | (817,209 | ) | (12,346 | ) | ||||||
Foreign operations |
15,268 | (18,269 | ) | (276 | ) | |||||||
|
|
|
|
|
|
|||||||
(759,583 | ) | (835,478 | ) | (12,622 | ) | |||||||
|
|
|
|
|
|
The provision (benefit) for income taxes consists of the following:
Current | Deferred | Total | ||||||||||
Year ended March 31, 2014 |
||||||||||||
Domestic |
30,758 | (19,528 | ) | 11,230 | ||||||||
Foreign |
4,617 | | 4,617 | |||||||||
|
|
|
|
|
|
|||||||
Total |
35,375 | (19,528 | ) | 15,847 | ||||||||
|
|
|
|
|
|
|||||||
Year ended March 31, 2015 |
||||||||||||
Domestic |
188,966 | 61,179 | 250,145 | |||||||||
Foreign |
3,004 | | 3,004 | |||||||||
|
|
|
|
|
|
|||||||
Total |
191,970 | 61,179 | 253,149 | |||||||||
|
|
|
|
|
|
|||||||
US$ |
2,900 | 924 | 3,824 | |||||||||
|
|
|
|
|
|
The foreign income tax provision represents current taxes on income in the United States earned by the Companys two U.S. subsidiaries.
F-29
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
The significant components of the net deferred income tax assets and liabilities exclusive of amounts that would not have any tax consequences because they will reverse within the Tax Holiday Period, are as follows:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Deferred tax assets: |
||||||||||||
Allowance for doubtful accounts |
86 | 408 | 6 | |||||||||
Other deductible temporary difference |
41,401 | 66,159 | 1,000 | |||||||||
Net operating loss |
99,316 | 11,221 | 170 | |||||||||
Total gross deferred tax assets |
140,803 | 77,788 | 1,175 | |||||||||
Valuation allowance |
(61,129 | ) | (37 | ) | (1 | ) | ||||||
|
|
|
|
|
|
|||||||
Total net deferred tax assets |
79,674 | 77,751 | 1,174 | |||||||||
|
|
|
|
|
|
|||||||
Deferred tax liabilities: |
||||||||||||
Depreciation and amortization |
(71,991 | ) | (159,678 | ) | (2,412 | ) | ||||||
Gain on sale of non-controlling interest |
(8,612 | ) | (8,612 | ) | (130 | ) | ||||||
Other taxable temporary differences |
(29,675 | ) | (1,207 | ) | (18 | ) | ||||||
|
|
|
|
|
|
|||||||
Total gross deferred liabilities |
(110,278 | ) | (169,497 | ) | (2,560 | ) | ||||||
|
|
|
|
|
|
|||||||
Net deferred tax liability |
(30,604 | ) | (91,746 | ) | (1,385 | ) | ||||||
|
|
|
|
|
|
Deferred income taxes have been shown on the consolidated balance sheets as follows:
As of March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Current assets |
| 22,453 | 339 | |||||||||
Non-current assets |
69,394 | 4,497 | 68 | |||||||||
Current liability |
28,802 | 998 | 15 | |||||||||
Non-current liability |
71,196 | 117,661 | 1,778 |
As of March 31, 2015, the Company performed an analysis of the deferred tax asset for its Mauritius, Indian and U.S. subsidiaries. Based on the analysis, the Company has concluded that a valuation allowance offsetting the deferred tax assets is required for losses incurred by APGL as of March 31, 2015 on the basis that it is more likely than not that APGL will not utilize the entirety of its net operating losses as it has no business operation of its own. The Company has concluded that a valuation allowance offsetting the deferred tax assets is not required at its Indian subsidiaries.
Change in the valuation allowance for deferred tax assets as of March 31, 2014 and 2015 is as follows:
As if March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Opening valuation allowance |
34,959 | 61,129 | 924 | |||||||||
Movement during the period |
26,170 | (61,092 | ) | (923 | ) | |||||||
|
|
|
|
|
|
|||||||
Closing valuation allowance |
61,129 | 37 | 1 | |||||||||
|
|
|
|
|
|
F-30
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
The effective income tax rate differs from the amount computed by applying the statutory income tax rate to loss before income taxes as follows:
Year ended 2014 | Year ended 2015 | |||||||||||||||
Tax | % | Tax | % | |||||||||||||
Statutory income tax benefit |
(258,182 | ) | (33.99 | )% | (283,979 | ) | (33.99 | %) | ||||||||
Temporary differences reversing in the Tax Holiday Period |
210,244 | 27.68 | % | 223,409 | 26.74 | % | ||||||||||
Taxes on intercompany transaction reversing in the Tax Holiday Period |
4,519 | 0.59 | % | 321,323 | 38.46 | % | ||||||||||
Valuation allowance on net operating losses |
26,170 | 3.45 | % | (61,092 | ) | (7.31 | )% | |||||||||
Other difference |
33,096 | 4.36 | % | 53,451 | 6.40 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
15,847 | 2.09 | % | 253,112 | 30.30 | % | |||||||||||
|
|
|
|
|
|
|
|
As of March 31, 2014 and 2015, deferred income taxes have not been provided for the Companys share of undistributed net earnings of foreign operations due to managements intent to reinvest such amounts indefinitely. Those earnings totaled Rs. 351,845 and Rs. 321,482 (US$4,857) as of March 31, 2014 and 2015, respectively. The total unrecognized deferred tax liability as of March 31, 2014 and 2015 is Rs. 119,627 and Rs. 109,304 (US$1,651), respectively.
The Company has adopted the provisions of ASC Topic 740 as they relate to uncertain income tax positions. Tax exposures can involve complex issues and may require extended periods to resolve. The Company does not currently have any uncertain tax positions requiring to be reserved for. The Company reassesses its tax positions in light of changing facts and circumstances, such as the closing of a tax audit, refinement of an estimate, or changes in tax codes. To the extent that the final tax outcome of these matters differs from the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made.
12. Interest expense, net
Interest expense, net consists of the following:
Year ended March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Interest expense: |
||||||||||||
CCDs |
217,751 | 248,831 | 3,759 | |||||||||
Series E CCPS |
74,700 | 96,500 | 1,458 | |||||||||
Term loans |
316,519 | 598,845 | 9,048 | |||||||||
Bank charges and other |
36,151 | 55,454 | 838 | |||||||||
|
|
|
|
|
|
|||||||
645,121 | 999,630 | 15,103 | ||||||||||
Interest income: |
||||||||||||
Term deposits |
111,842 | 151,860 | 2,294 | |||||||||
Interest income from related parties |
| 2,031 | 31 | |||||||||
Gain on sale of short term investments |
13,060 | 13,949 | 211 | |||||||||
|
|
|
|
|
|
|||||||
124,902 | 167,840 | 2,536 | ||||||||||
|
|
|
|
|
|
|||||||
Total |
520,219 | 831,790 | 12,567 | |||||||||
|
|
|
|
|
|
F-31
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
13. Loss on foreign currency exchange
Loss on foreign currency exchange consists of the following:
Year ended March 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Unrealized loss on foreign currency loans |
578,571 | 240,656 | 3,636 | |||||||||
Realized loss on foreign currency loans |
39,989 | (42,280 | ) | (639 | ) | |||||||
Unrealized (gain) loss on derivative instruments |
(16,384 | ) | 7,342 | 111 | ||||||||
Realized loss on derivative instruments |
(21,610 | ) | 93,910 | 1,419 | ||||||||
|
|
|
|
|
|
|||||||
Total |
580,566 | 299,628 | 4,527 | |||||||||
|
|
|
|
|
|
14. Equity and preferred shares
Equity shares
Equity share have a par value of US$0.01 per share. There is no limit on the number of equity shares authorized. As of March 31, 2014 and 2015, there were 109,880 shares of equity issued and outstanding.
Compulsory convertibles preferred shares
There is no limit on the number of preferred shares the Company can issue. As of March 31, 2015, the compulsory convertible preferred shares (CCPS) consists of the followings:
No of shares |
Total consideration
(Rs.) |
Price per share
(Rs.)* |
||||||||||
Series A |
38,770 | 92,492 | 2,386 | |||||||||
Series B |
181,046 | 503,994 | 2,787 | |||||||||
Series C |
229,880 | 381,600 | 1,660 | |||||||||
Series D |
84,348 | 474,964 | 5,631 | |||||||||
Series F |
138,133 | 1,550,508 | 11,225 | |||||||||
|
|
|
|
|||||||||
672,177 | 3,003,558 | |||||||||||
|
|
|
|
* | Not in thousands |
In November 2008, the Company issued 38,770 Series A CCPS for consideration of Rs. 91,617, (net of Rs. 875 share issue expenses). In February 2010, the Company issued 181,046 Series B CCPS for consideration of Rs. 500,749 (net of Rs. 3,263 share issue expenses). In September 2011, the Company issued 229,880 Series C CCPS for consideration of Rs. 377,562 (net of Rs. 4,038 share issue expenses). In September 2012, the Company issued 84,348 Series D CCPS for consideration of Rs. 474,964 (net of Rs. NIL share issue expenses). From June 2014 to January 2015 the Company issued 138,133 series F CCPS for a total consideration of Rs. 1,549,010 (net of Rs. 1,499 share issue expenses). Unless converted, the term of the Series A CCPS is a maximum of the 19 years from the date issue, whereas the terms of Series B, Series C, Series D and Series F CCPS is a maximum of 20 years, as amended, from the date of issue.
F-32
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
The rights, preferences and privileges of the Companys Series A, Series B, Series C, Series D and Series F CCPS (collectively, the Mezzanine CCPS) are as follows:
Voting
The Mezzanine CCPS rank pari passu with regards to voting rights. Holders of Mezzanine CCPS are entitled to vote on all matters and are entitled to the number of votes equal to the number of equity shares into which the Mezzanine CCPS shares are then convertible on the basis of the applicable conversion factor.
Dividend
Each of the holders of the Mezzanine CCPS are entitled to a 8.0% per annum per share non-cumulative dividend, declared and paid in accordance with the Indian Companies Act of 2013, and thereafter participate pro rata on an as converted basis with the equity shareholders on any distributions made to the equity shareholders. The Company has not declared or paid any dividends through March 31, 2015.
Conversion
Each of the Series A, Series B, Series D and Series F CCPS are convertible into equity shares of the Company at the option of the CCPS holders at any time at a conversion ratio of 1:1. The Series C CCPS are convertible into equity shares of the Company at the option of the CCPS holder at any time at a conversion ratio of 1:0.3423. Any Mezzanine CCPS which have not been converted into equity shares of the Company are compulsorily converted into equity shares of the Company, at the aforementioned ratios, upon the filing of a DRHP, execution of a QIPO or at their maturity date.
Buyback
Should a buyback obligation not occur by February 25, 2016 or the funding covenants of the CCPS holders are breached, the Mezzanine CCPS holders may request the Company to buyback the CCPS at the following rates:
|
Series A CCPS 140% of the cash paid for the Series A CCPS, plus accrued and unpaid dividends |
|
Series B, Series C and Series D CCPS 200% of the cash paid, plus accrued and unpaid dividends |
|
Series F CCPS 150% of the cash paid for the Series F CCPS, plus accrued and unpaid dividends |
Buyback obligations of the Mezzanine CCPS continue to be computed in Indian Rupees.
Liquidation
On occurrence of a liquidation event, as defined in the terms of the Mezzanine CCPS agreements, the Series A holders are eligible to receive an amount equal to 140% of the cash paid for the Series A CCPS, plus accrued and unpaid dividends, and the Series B, Series C and Series D holders have the right to receive an amount equal to 200% of the cash paid, plus accrued and unpaid dividends, and the Series F holders have the right to receive an amount equal to 150% of the cash paid, plus accrued and unpaid dividends. Upon such a liquidation event, the holders of the CCDs and Series E CCPS are entitled to receive amounts in preference to the Series B, Series C, Series D CCPS and Series F, who in turn receive amounts in preference to the holders of the Series A CCPS. Series A CCPS holders receive amounts in preference to the Companys equity shareholders.
F-33
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Liquidation preferences for each series of Mezzanine CCPS as of February 25, 2016 are as follows
Liquation
Preference |
(Rs.) |
(US$) | ||||||||||
Series A |
140 | % | 129,488 | 1,956 | ||||||||
Series B |
200 | % | 1,007,988 | 15,229 | ||||||||
Series C |
200 | % | 763,202 | 11,530 | ||||||||
Series D |
200 | % | 949,927 | 14,352 | ||||||||
Series F |
150 | % | 2,325,763 | 35,138 | ||||||||
|
|
|
|
|||||||||
5,176,368 | 78,205 | |||||||||||
|
|
|
|
Accounting
The Company has evaluated its accounting for the Mezzanine CCPS pursuant to ASC Topic 480 and ASC Topic 815 Derivative and hedging. The Mezzanine CCPS do not satisfy the criteria for liability classification described in ASC Topic 480. In addition, the embedded features of the Mezzanine CCPS do not satisfy the criteria for separate accounting of the derivative from the host instrument pursuant to ASC Topic 815. However, because the Mezzanine CCPS contain certain redemption features that are not solely within the Companys control, the Mezzanine CCPS are classified as temporary equity in the consolidated balance sheets.
The Mezzanine CCPS are being accreted to their buyback value through February 25, 2016, the earliest buyback date on a straight line basis, so that the carrying amount will equal the mandatory redemption at such date.
The Company incurred issuance costs amounting to Rs. 9,675 (US$146) which have been netted against the proceeds received from the issuance of the Mezzanine CCPS. The issuance costs are being accreted over the respective redemption periods on a straight line basis. The amount accreted totaled Rs. 1,573 and Rs. 1,899 (US$29) during the years ended March 31, 2014 and 2015, respectively. The remaining un-accreted amount of issuance cost as of March 31, 2015 totaled Rs. 2,600 (US$39).
15. Earnings per share
The Company calculates earnings per share in accordance with FASB ASC Topic 260 Earnings per Share and FASB ASC Topic 260-10-45 Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities . Basic and diluted earnings (loss) per equity share give effect to the change in the number of equity shares of the Company. The calculation of basic earnings per equity share is determined by dividing net loss attributable to AZI equity shareholders by the weighted average number of equity shares outstanding during the respective periods. The potentially dilutive shares, consisting of employee share options, compulsorily convertible debentures, and compulsorily convertible preferred shares are included in the computation of diluted net earnings per share and the weighted average shares outstanding, except where the result would be anti-dilutive.
The Mezzanine CCPS shareholders are entitled to participate, along with the equity shareholders, in the earnings of the Company. Under ASC Topic 260 Earnings per Share , such participative rights would require the two class method of reporting EPS. As the preferred shares do not participate in losses, the Company has excluded these shares, as including them would be antidilutive.
F-34
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Loss per share is presented below:
Year ended March 31, | ||||||||
2014
(Rs.) |
2015
(Rs.) |
|||||||
Net loss attributable to APGL equity shareholders |
(748,495 | ) | (1,082,995 | ) | ||||
Add: Accretion on Mezzanine CCPS |
(366,552 | ) | (755,207 | ) | ||||
|
|
|
|
|||||
Total (A) |
(1,115,047 | ) | (1,838,202 | ) | ||||
|
|
|
|
|||||
Shares outstanding for allocation of undistributed income: |
||||||||
Equity shares |
109,880 | 109,830 | ||||||
|
|
|
|
|||||
Weighted average shares outstanding |
||||||||
Equity shares (B) |
108,882 | 109,830 | ||||||
|
|
|
|
|||||
(Loss) per share: |
||||||||
Equity shares (C=A/B) |
(10,241 | ) | (16,737 | ) | ||||
|
|
|
|
The number of share options outstanding but not included in the computation of diluted earnings per equity share because their effect was antidilutive is 24,501 and 28,821 for the years ended March 31, 2014 and 2015, respectively.
The CCDs and the Series E CCPS have not been considered for the computation of diluted earnings per share because including these instruments would be anti-dilutive.
16. Leases
The Company leases office facilities and land use rights under operating lease agreements. Minimum lease payments under operating leases are recognized on a straight line basis over the term of the lease. Rent expense for operating leases for the years ended March 31, 2014 and 2015 was Rs. 19,803 and Rs. 44,169 (US$667), respectively.
Future minimum lease payments under non-cancellable operating leases as of March 31, 2015 are:
Year ending March 31, |
Amount (Rs.) | US$ | ||||||
2016 |
13,326 | 201 | ||||||
2017 |
13,782 | 208 | ||||||
2018 |
13,522 | 204 | ||||||
2019 |
12,513 | 189 | ||||||
2020 |
13,105 | 198 | ||||||
Thereafter |
596,680 | 9,015 | ||||||
|
|
|
|
|||||
Total |
662,928 | 10,015 | ||||||
|
|
|
|
F-35
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
17. Commitments, guarantees and contingencies
Capital commitments
During the normal course of business, the Company purchases assets for the construction of solar power plants and estimates it will incur Rs. 1,688,983 (US$25,517) during the fiscal year ended March 31, 2016 in relation to such purchase commitments.
Guarantees
The Company issues irrevocable performance bank guarantees in relation to its obligations to construct the solar power plant when required to by the PPA. Such outstanding guarantees amounted to Rs. 588,850 and Rs. 1,083,300 (US$16,367) as of March 31, 2014 and March 31, 2015, respectively. The guarantees expire on the commissioning of the constructed solar power plant.
The Company has obtained guarantees from financial institutions as a part of the bidding process for establishing solar projects amounting to Rs. 189,370 and Rs. 259,000 (US$3,913) as of March 31, 2014 and March 31, 2015, respectively. The Company has given term deposits as collateral for the guarantees which are classified as restricted cash on the consolidated balance sheets.
The terms of the PPAs provide for the annual delivery of a minimum amount of electricity at fixed prices.
18. Related Party Disclosures
For the years ended March 31, 2014 and 2015, the Company incurred rent expense on office facilities totaling Rs. 14,352 and Rs. 14,490 (US$219), respectively, where the lessors are relatives of the Companys chief executive officer and another director of the Company. As of March 31, 2014 and 2015, the Company had security deposits with these lessors totaling Rs. 6,300 and Rs.6,300 classified as current and non-current asset on the consolidated balance sheets because the rental agreements were short-term and long term respectively, at those dates.
As of March 31, 2014, the Company had an unsecured loan receivable from the Companys chief executive officer totaling Rs. 41,392. The loan was repaid during the year ended March 31, 2015. During the years ended March 31, 2014 and 2015, the Company earned interest income of Rs. 131 and Rs. 2,031 (US$31), respectively on this loan.
19. Share based compensation plan
The Company has issued share options under the employees share option plan approved on October 1, 2008 and amended on April 18, 2013 to eligible employees of the Company. This share option plan expires on September 30, 2018. Under the share option plan, the sum of all grants made under this plan shall not exceed 36,543 equity shares of the Company.
Options are deemed to have been issued under this plan only to the extent actually issued and delivered pursuant to a grant. To the extent that a grant lapses or the rights of its grantee terminate, any equity shares subject to such grant are again available for new grants.
The option grant is at such price as may be determined by the Board of Directors and is specified in the option grant. The grant is in writing and specifies the number of options granted, the price payable for exercising the options, the date/s on which some or all of the options shall be eligible for vesting, fulfillment of the
F-36
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
performance and other conditions, if any, subject to which vesting shall take place and other terms and conditions thereto. The option grant is not be transferable and can be exercised only by the employees of the Company.
Options granted under the plan are exercisable into equity shares of the Company, have a contractual life equal to the shorter of ten years or through September 30, 2018 and vest equitably over four years, unless specified otherwise in the applicable award agreement. The Company recognizes compensation cost, reduced by the estimated forfeiture rate, over the vesting period of the option. A summary of share option activity during the years ended March 31, 2014 and 2015 is set out below:
Number of shares |
Weighted average
exercise price in Rs. * |
|||||||
Balance As of March 31, 2013 |
23,856 | 2,564 | ||||||
Granted |
2,300 | 2,745 | ||||||
Exercised |
(1,000 | ) | 10 | |||||
Forfeitures |
(655 | ) | 4,753 | |||||
|
|
|
|
|||||
Outstanding As of March 31, 2014 |
24,501 | 2,678 | ||||||
Granted |
4,320 | 7,435 | ||||||
Exercised |
| | ||||||
Forfeitures |
| | ||||||
|
|
|
|
|||||
Outstanding As of March 31, 2015 |
28,821 | 3,391 | ||||||
|
|
|
|
|||||
Vested and exercisable as of March 31, 2015 |
20,850 | 2,621 | ||||||
|
|
|
|
|||||
Available for grant as of March 31, 2015 |
6,722 | | ||||||
|
|
* | Not in thousands |
The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected option term, and risk-free interest rates. The Company estimates expected volatility based on the historical volatility of comparable publicly traded companies for a period that is equal to the expected term of the options. The risk-free interest rate is based on the treasury bonds issued by the Indian Government in effect at the time of grant for a period commensurate with the estimated expected life. The expected term of options granted is derived using the simplified method as allowed under the provisions of ASC Topic 718 due to insufficient historical exercise history data to provide a reasonable basis upon which to estimate expected term.
The fair value of each share option granted to employees is estimated on the date of grant using the Black- Scholes option-pricing model with the following weighted average assumptions:
Year ended March 31, | ||||
2014 | 2015 | |||
Dividend yield |
0.00% | 0.00% | ||
Expected term (in years) |
2.61-4.70 | 2.09-3.84 | ||
Expected volatility |
43.9%-45.6% | 31.2%-42.3% | ||
Risk free interest rate |
7.51%-7.68% | 7.69%-8.34% |
F-37
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Outstanding options as of March 31, 2015 include 5,000 options issued during the year ended March 31, 2013 with a market vesting condition. The fair value of these options was determined using the Lattice valuation model with the following assumptions:
Volatility |
48.1 | % | ||
Risk- free interest rate |
8.18 | % |
The result of the Lattice valuation model concludes that the probability of achieving the market conditions to be 5.72%.
As of March 31, 2014 and March 31, 2015, the aggregate intrinsic value of all outstanding options was Rs. 10,551 and Rs. 26,531 (US$401), respectively.
The share based compensation expense related to share options is recorded as a component of general and administrative expenses in the Companys consolidated statements of operations and totaled Rs. 4,419 and Rs. 7,428 (US$112) for the years ended March 31, 2014 and 2015, respectively.
Unrecognized compensation cost for unvested options as of March 31, 2015 is Rs. 4,510 (US$68), which is expected to be expensed over a weighted average period of 1.39 years.
The intrinsic value of options exercised during the year ended March 31, 2015 was Rs. NIL.
The intrinsic value per option at the date of grant during the years ended March 31, 2014 and 2015 is as follows:
Date of grant |
No. of options
granted |
Deemed fair value
of equity shares |
Intrinsic value per
option |
Valuation used | ||||||||||||
May 6, 2013 |
1,300 | 3,651 | (1 | ) | Retrospective | |||||||||||
July 13, 2013 |
1,000 | 3,651 | 3,641 | Retrospective | ||||||||||||
July 28, 2014 |
1,460 | 5,266 | 5,256 | Retrospective | ||||||||||||
January 24, 2015 |
2,860 | 4,142 | (1 | ) | Retrospective |
(1) | Fair value of the shares exceeds the exercise price. |
20. Fair value
FASB ASC Topic 820 Fair Value Measurements and Disclosures defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly, hypothetical transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier value hierarchy of fair value measurement based upon the whether the inputs to that measurement are observable or unobservable. Observable inputs reflect data obtained from independent sources while unobservable inputs reflect the Companys market assumptions. ASC Topic 820 prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
F-38
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Level 2 Includes other inputs that are directly or indirectly observable in the marketplace. Observable inputs, other than Level 1 quoted prices for similar instruments in active markets; quoted prices for similar or identical instruments in markets that are not active; and valuations using models in which all significant inputs are observable in active markets.
Level 3 Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
In accordance with ASC Topic 820, assets and liabilities are to be measured based on the following valuation techniques:
Market approach Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Income approach converting the future amounts based on the market expectations to its present value using the discounting methodology.
Cost approach Replacement cost method.
The valuation techniques used by the Company to measure and report the fair value of certain financial assets and liabilities on a recurring basis are as follows;
Foreign exchange derivative contracts
The Company enters into foreign exchange derivative contracts to hedge fluctuations in foreign exchange rates for recognized balance sheet items such as foreign exchange term loans. The Company mitigates the credit risk of these foreign exchange derivative contracts by transacting with highly rated counterparties in India which are major banks. The Company used the super derivatives option pricing model based on the principles of the Black-Scholes model to determine the fair value of the foreign exchange derivative contracts. The inputs considered in this model include the theoretical value of a call option, the underlyings spot exchange rate as of the balance sheet date, the contracted price of the respective option contract, the term of the option contract, the implied volatility of the underlying foreign exchange rates and the risk free interest rate as of the balance sheet date. The techniques and models incorporate various inputs including the credit worthiness of counterparties, foreign exchange spot and forward rates, interest rate yield curves, forward rate yield curves of the underlying. The Company classifies the fair value of these foreign exchange derivative contracts in Level 2 because the inputs used in the valuation model are observable in active markets over the term of the respective contracts.
Compulsorily convertible debentures and Series E compulsorily convertible preferred shares
The Company classifies the fair value of the CCDs and the Series E CCPS in level 3 because the fair values have been derived using valuation techniques in which one or more significant inputs are unobservable. The Company has used the discounted cash flow analysis under the income approach to determine the fair value of the CCDs and the Series E CCPs. This valuation model includes various inputs including issue price, liquidation amount, committed internal rate of return, discount rate and coupon rate.
F-39
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Fair Value measurement at reporting date using | ||||||||||||||||
As of March 31,
2014 (Rs.) |
Quoted Prices in
Active Markets for Identical Assets (Level 1) (Rs.) |
Significant
Other Observable Inputs (Level 2) (Rs.) |
Significant
Unobservable Inputs (Level 3) (Rs.) |
|||||||||||||
Description |
||||||||||||||||
Assets |
||||||||||||||||
Current assets |
||||||||||||||||
Foreign exchange derivative contracts |
25,135 | | 25,135 | | ||||||||||||
Non-current assets |
||||||||||||||||
Foreign exchange derivative contracts |
202,669 | | 202,669 | | ||||||||||||
|
|
|
|
|||||||||||||
Total assets |
227,804 | | 227,804 | | ||||||||||||
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||
Noncurrent liabilities |
||||||||||||||||
Compulsorily convertible debentures |
1,428,800 | | | 1,428,800 | ||||||||||||
Series E compulsorily convertible preferred shares |
566,100 | 566,100 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total non-current liabilities |
1,994,900 | | | 1,994,900 | ||||||||||||
|
|
|
|
|
|
|
|
Fair Value measurement at reporting date using | ||||||||||||||||
As of March 31,
2015 (Rs.) |
Quoted Prices in
Active Markets for Identical Assets (Level 1) (Rs.) |
Significant
Other Observable Inputs (Level 2) (Rs.) |
Significant
Unobservable Inputs (Level 3) (Rs.) |
|||||||||||||
Description |
||||||||||||||||
Assets |
||||||||||||||||
Current assets |
||||||||||||||||
Foreign exchange derivative contracts |
75,750 | | 75,750 | | ||||||||||||
Non-current assets |
||||||||||||||||
Foreign exchange derivative contracts |
158,338 | | 158,338 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
234,088 | | 234,088 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Current liability |
||||||||||||||||
Compulsorily convertible debentures |
987,681 | | | 987,681 | ||||||||||||
Noncurrent liabilities |
||||||||||||||||
Compulsorily convertible debentures and Series E compulsorily convertible preferred shares |
1,473,519 | | | 1,473,519 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
2,461,200 | | | 2,461,200 | ||||||||||||
|
|
|
|
|
|
|
|
F-40
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Changes in compulsorily convertible debentures are as follows:
Rs. | US$ | |||||||
Balance as of March 31, 2013 |
1,313,200 | 19,840 | ||||||
Increase in fair value |
115,600 | 1,746 | ||||||
|
|
|
|
|||||
Balance as of March 31, 2014 |
1,428,800 | 21,586 | ||||||
Issuance of CCDs - IFC III |
180,000 | 2,719 | ||||||
Increase in fair value |
189,800 | 2,868 | ||||||
|
|
|
|
|||||
Balance as of March 31, 2015 |
1,798,600 | 27,173 | ||||||
|
|
|
|
Changes in Series E CCPS are as follows:
Rs. | US$ | |||||||
Balance as of March 31, 2013 |
| | ||||||
Issuance of Series E CCPS |
491,400 | 7,424 | ||||||
Increase in fair value |
74,700 | 1,129 | ||||||
|
|
|
|
|||||
566,100 | 8,553 | |||||||
Increase in fair value |
96,500 | 1,458 | ||||||
|
|
|
|
|||||
Balance as of March 31, 2015 |
662,600 | 10,011 | ||||||
|
|
|
|
The carrying amount of cash and cash equivalents, including restricted cash, accounts receivable, accounts payables, and other current financial assets and liabilities approximate their fair value largely due to the short-term maturities of these instruments.
The carrying value and fair value of the Companys fixed rate project financing term loans is as follows:
As of March 31, | ||||||||||||||||||||
2014 | 2015 | |||||||||||||||||||
Carrying
Value Rs. |
Fair
Value Rs. |
Carrying
Value Rs. |
Fair
Value Rs. |
US$ | ||||||||||||||||
Fixed rate project financing loans: |
||||||||||||||||||||
Foreign currency loans |
6,186,577 | 6,429,000 | 6,046,900 | 6,754,000 | 102,040 |
The Company uses the yield method to estimate the fair value of fixed rate loans using interest rate changes as an input.
F-41
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
21. Derivative instruments and hedging activities
The following table presents outstanding notional amount and balance sheet location information related to foreign exchange derivative contracts as of March 31, 2014 and 2015:
As of March 31, | ||||||||||||||||||||||||
2014 | 2015 | |||||||||||||||||||||||
Notional
Amount |
Prepaid Expenses
and Other Current Asset |
Other
Assets |
Notional
Amount |
Prepaid Expenses
and Other Current Asset |
Other
Assets |
|||||||||||||||||||
Foreign currency option contracts (Rs.) |
| 25,135 | 202,669 | | 75,750 | 158,338 | ||||||||||||||||||
Foreign currency option contracts (US$) |
23,448 | | | 21,514 | | |
The foreign exchange derivative contracts mature generally over a period of 12 to 36 months.
Gains (losses) on foreign exchange derivative contracts for the years ended March 31, 2014 and 2015 aggregated Rs. 37,994 and Rs. 101,252 (US$1,530), respectively.
22. Concentrations of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, accounts receivables and derivative instruments. The Company mitigates the risk of credit losses from financial instruments, other than trade receivables, by selecting counterparties that are well known Indian or international banks.
The following customers account for more than 10% of the Companys accounts receivable and sale of power as of and during the years ended March 31, 2014 and 2015:
March 31, 2014 | March 31, 2015 | |||||||||||||||
Customer Name |
% of Accounts
Receivable |
% of Sale of
Power |
% of Accounts
Receivable |
% of Sale of
Power |
||||||||||||
NTPC Vidyut Vyapar Nigam Limited |
66.90 | % | 78.20 | % | 46.87 | % | 60.80 | % | ||||||||
Gujarat Urja Vikas Nigam Limited |
29.40 | % | 18.80 | % | 19.87 | % | 15.42 | % | ||||||||
Punjab State Power Corporation Limited... |
| | 13.82 | % | 14.78 | % |
23. Subsequent events
The Company has incurred additional borrowings under project level secured term loans amounting to Rs. 3,859,800 (US$58,314) subsequent to March 31, 2015.
From April 2015 through February 2016, the Company commenced commercial operations of 1 MW rooftop and 158 MW solar power plants in the states of Punjab, Rajasthan and Chhattisgarh.
During July 2015, the Company had sold 59,239 shares, constituting 28.58% of the total outstanding shares for a consideration of Rs. 316,929 (US$4,788) in Azure Power Infra (50 MW project in Andhra Pradesh) to one of the vendors.
The Company issued 133,285 and 18,882 shares of Series H and Series G Compulsorily Convertible Preferred Shares during July and August, 2015, resulting in net proceeds of Rs. 3,696,699 (US$ 55,850) and Rs. 541,946 (US$8,188) respectively.
F-42
AZURE POWER GLOBAL LIMITED
Notes to Consolidated Financial Statements
Rs. and US$ amounts in thousands, except share and per share data
Azure Power Global Limited has adopted an employee stock option plan on July 20, 2015. Employees who were previously granted options under the AZI employee stock option plan have been granted options under the new Azure Power Global Limited employee stock option plan. The AZI employee stock option plan and all options granted to employees under such plan will be terminated. The modification resulted in an incremental fair value of Rs. 45,719 (US$691), which is being amortized over the vesting term.
The Company evaluated all events or transactions that occurred after March 31, 2015. Based on this evaluation, the Company is not aware of any event or transactions that would require recognition or disclosure in the financial statements.
F-43
Condensed Consolidated Balance Sheets
(Rs. and US$ amounts in thousands, except share and par value data)
As of March 31,
2015 (Rs.) |
As of December 31,
(Unaudited) |
Proforma as of
December 31, (Unaudited)(1) |
||||||||||||||||||
2015
(Rs.) |
2015
(US$) |
2015
(Rs.) |
2015
(US$) |
|||||||||||||||||
(Note 2(d)) | (Note 2(d)) | |||||||||||||||||||
Assets |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
2,044,290 | 3,744,450 | 56,571 | 3,744,450 | 56,571 | |||||||||||||||
Restricted cash |
702,407 | 1,679,005 | 25,366 | 1,679,005 | 25,366 | |||||||||||||||
Accounts receivable, net |
237,956 | 554,898 | 8,383 | 554,898 | 8,383 | |||||||||||||||
Deferred income tax asset |
22,453 | 77,283 | 1,168 | 77,283 | 1,168 | |||||||||||||||
Deferred IPO cost |
88,400 | 172,709 | 2,609 | | | |||||||||||||||
Prepaid expenses and other current assets |
240,730 | 316,470 | 4,781 | 316,470 | 4,781 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
3,336,236 | 6,544,815 | 98,878 | 6,372,106 | 96,269 | |||||||||||||||
Restricted cash |
600,794 | 670,885 | 10,136 | 670,885 | 10,136 | |||||||||||||||
Property, plant and equipment, net |
15,145,674 | 21,058,666 | 318,155 | 21,058,666 | 318,155 | |||||||||||||||
Software, net |
15,720 | 16,871 | 255 | 16,871 | 255 | |||||||||||||||
Deferred income taxes |
4,460 | 74,644 | 1,128 | 74,644 | 1,128 | |||||||||||||||
Other assets* |
820,824 | 904,277 | 13,662 | 904,277 | 13,662 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
19,923,708 | 29,270,158 | 442,214 | 29,097,449 | 439,605 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities, preferred shares and shareholders deficit |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Short-term debt |
| 1,748,000 | 26,409 | 1,748,000 | 26,409 | |||||||||||||||
Accounts payable |
971,467 | 1,772,359 | 26,777 | 1,772,359 | 26,777 | |||||||||||||||
Current portion of long-term debt |
2,254,344 | 4,160,794 | 62,860 | 820,175 | 12,391 | |||||||||||||||
Income taxes payable |
115,945 | 134,242 | 2,028 | 134,242 | 2,028 | |||||||||||||||
Deferred income taxes |
998 | 600 | 9 | 600 | 9 | |||||||||||||||
Interest payable |
55,879 | 129,489 | 1,956 | 129,489 | 1,956 | |||||||||||||||
Deferred revenue |
| 80,365 | 1,214 | 80,365 | 1,214 | |||||||||||||||
Other liabilities |
274,268 | 214,749 | 3,244 | 214,749 | 3,244 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
3,672,901 | 8,240,598 | 124,497 | 4,899,979 | 74,028 | |||||||||||||||
Long-term debt |
15,478,509 | 16,218,685 | 245,032 | 16,218,685 | 245,032 | |||||||||||||||
Deferred revenue |
317,702 | 1,183,240 | 17,876 | 1,183,240 | 17,876 | |||||||||||||||
Deferred income taxes |
117,661 | 272,157 | 4,112 | 272,157 | 4,112 | |||||||||||||||
Asset retirement obligations |
70,942 | 92,513 | 1,398 | 92,513 | 1,398 | |||||||||||||||
Other liabilities |
18,630 | 30,358 | 459 | 30,358 | 459 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
19,676,345 | 26,037,551 | 393,374 | 22,696,932 | 342,905 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Preferred shares, Rs. 10 par value, 672,177 and 805,462 shares designated as compulsorily convertible preferred shares as of March 31, 2015 and December 31, 2015, respectively (liquidation preference is Rs.9,151,902 as of December 31, 2015) |
4,689,942 | 9,461,436 | 142,944 | | | |||||||||||||||
Redeemable Non-Controlling interest |
| 335,765 | 5,073 | 335,765 | 5,073 | |||||||||||||||
Shareholders deficit |
||||||||||||||||||||
Equity shares, US$ 0.01 par value; 109,880 and 109,880 shares issued and outstanding as of March 31, 2015 and December 31, 2015, respectively |
68 | 68 | 1 | 68 | 1 | |||||||||||||||
Additional paid-in capital |
(1,642,112 | ) | (2,688,640 | ) | (40,620 | ) | 9,940,706 | 150,184 | ||||||||||||
Accumulated deficit |
(2,828,302 | ) | (3,899,746 | ) | (58,917 | ) | (3,899,746 | ) | (58,917 | ) | ||||||||||
Accumulated other comprehensive income |
23,192 | 28,036 | 424 | 28,036 | 424 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total APGL shareholders deficit |
(4,447,154 | ) | (6,560,282 | ) | (99,112 | ) | 6,069,064 | 91,692 | ||||||||||||
Non-controlling interest |
4,575 | (4,312 | ) | (65 | ) | (4,312 | ) | (65 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total shareholders deficit |
(4,442,579 | ) | (6,564,594 | ) | (99,177 | ) | 6,064,752 | 91,627 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities, preferred share and shareholders deficit |
19,923,708 | 29,270,158 | 442,214 | 29,097,449 | 439,605 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | In connection with the Companys proposed Initial Public Offering, the compulsorily convertible debentures (Note 9) and the compulsorily convertible preferred shares (Notes 9 and 13) will be converted to equity shares. The pro forma balance sheet data as of December 31, 2015 reflects the conversion of these securities into the Companys equity shares and application of deferred IPO costs of Rs. 172,709 (US$2,609) as of December 31, 2015 against additional paid-in capital. |
* | Includes Security deposit of Rs.6,300 (US$95) to related parties as of 31 March, 2015 and December 31, 2015, also see Note 17. |
F-44
Condensed Consolidated Statements of Operations
(Rs. and US$ amounts in thousands, except share and per share data)
(Unaudited)
Nine months ended December 31, | ||||||||||||
2014 | 2015 | 2015 | ||||||||||
(Rs.) | (Rs.) | (US$) | ||||||||||
(Note 2d) | ||||||||||||
Operating revenues: |
||||||||||||
Sale of power |
767,362 | 1,858,911 | 28,084 | |||||||||
Operating costs and expenses: |
||||||||||||
Cost of operations (exclusive of depreciation and amortization shown separately below) |
54,029 | 127,308 | 1,923 | |||||||||
General and administrative |
241,884 | 481,528 | 7,275 | |||||||||
Depreciation and amortization |
218,016 | 495,647 | 7,488 | |||||||||
|
|
|
|
|
|
|||||||
Total operating cost and expenses |
513,929 | 1,104,483 | 16,686 | |||||||||
|
|
|
|
|
|
|||||||
Operating income |
253,433 | 754,428 | 11,398 | |||||||||
Other expense: |
||||||||||||
Interest expense, net |
563,928 | 1,389,289 | 20,989 | |||||||||
Loss on foreign currency exchange, net |
368,631 | 337,112 | 5,093 | |||||||||
|
|
|
|
|
|
|||||||
Total other expenses |
932,559 | 1,726,401 | 26,082 | |||||||||
|
|
|
|
|
|
|||||||
Loss before income tax |
(679,126 | ) | (971,973 | ) | (14,684 | ) | ||||||
Income tax expense |
(205,804 | ) | (89,427 | ) | (1,351 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss |
(884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss attributable to non-controlling interest |
(5,311 | ) | (8,633 | ) | (130 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss attributable to APGL |
(879,619 | ) | (1,052,767 | ) | (15,905 | ) | ||||||
Accretion to Mezzanine CCPS |
(494,927 | ) | (1,076,087 | ) | (16,258 | ) | ||||||
Accretion to redeemable non-controlling interest |
| (18,837 | ) | (285 | ) | |||||||
|
|
|
|
|
|
|||||||
Net loss attributable to APGL equity shareholders |
(1,374,546 | ) | (2,147,691 | ) | (32,448 | ) | ||||||
|
|
|
|
|
|
|||||||
Net loss per share attributable to APGL equity stockholders |
||||||||||||
Basic and diluted |
(12,510 | ) | (19,546 | ) | (295 | ) | ||||||
Shares used in computing basic and diluted per share amounts |
||||||||||||
Equity shares |
109,880 | 109,880 | ||||||||||
Pro forma (unaudited)(1) |
||||||||||||
Pro forma net loss |
| | ||||||||||
Pro forma net loss attributable to non-controlling interest |
| | ||||||||||
Pro forma net loss attributable to APGL equity shareholders |
| | ||||||||||
Pro forma basic and diluted loss per share |
| | ||||||||||
Pro forma shares used in computing basic and diluted per share amounts |
| |
(1) | Pro forma disclosures for the nine months ended December 31, 2015 reflect the conversion of all outstanding compulsorily convertible debentures (Note 9) and compulsorily convertible preferred shares (Notes 9 and 13) into equity shares before the Initial Public Offering. |
The pro forma disclosures will be completed once the equity shares upon conversion can be determined. For pro forma purposes, these conversions are assumed to have occurred as of the beginning of the period.
See accompanying notes.
F-45
Condensed Consolidated Statements of Comprehensive Loss
(Rs. and US$ amounts in thousands)
(Unaudited)
Nine months ended December 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
(Note 2(d)) | ||||||||||||
Net loss attributable to APGL equity shareholders |
(1,374,546 | ) | (2,147,691 | ) | (32,448 | ) | ||||||
Add: Non-controlling interest |
(5,311 | ) | (8,633 | ) | (130 | ) | ||||||
Other comprehensive loss net of tax |
||||||||||||
Foreign currency translation |
(3,723 | ) | (4,846 | ) | (73 | ) | ||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss |
(1,383,580 | ) | (2,161,170 | ) | (32,651 | ) | ||||||
Less: Total comprehensive loss attributable to non-controlling interest |
| | | |||||||||
|
|
|
|
|
|
|||||||
Total comprehensive loss attributable to APGL equity shareholders |
(1,383,580 | ) | (2,161,170 | ) | (32,651 | ) | ||||||
|
|
|
|
|
|
See accompanying notes.
F-46
Condensed Consolidated Statements of Preferred Shares and Shareholders Deficit
(Rs. and US$ amounts in thousands)
(Unaudited)
Preferred
shares |
Equity
shares |
Additional
paid in capital |
Accumulated
other comprehensive income |
Accumulated
deficit |
Total APGL
shareholders deficit |
Non-
controlling interests |
Total
shareholders deficit |
|||||||||||||||||||||||||
Balance as of March 31, 2014 |
2,385,725 | 68 | (894,401 | ) | 20,012 | (1,745,307 | ) | (2,619,628 | ) | 10,170 | (2,609,458 | ) | ||||||||||||||||||||
Proceeds from issue of shares to founders |
| | 68 | | | 68 | | 68 | ||||||||||||||||||||||||
Issuance of series F CCPS |
1,549,010 | | | | | | | | ||||||||||||||||||||||||
Net loss |
| | | | (1,082,995 | ) | (1,082,995 | ) | (5,595 | ) | (1,088,590 | ) | ||||||||||||||||||||
Accretion on Mezzanine CCPS |
755,207 | | (755,207 | ) | | | (755,207 | ) | | (755,207 | ) | |||||||||||||||||||||
Other comprehensive loss |
| | | 3,180 | | 3,180 | | 3,180 | ||||||||||||||||||||||||
Share based compensation |
| | 7,428 | | | 7,428 | | 7,428 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance as of March 31, 2015 |
4,689,942 | 68 | (1,642,112 | ) | 23,192 | (2,828,302 | ) | (4,447,154 | ) | 4,575 | (4,442,579 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
shares |
Equity
shares |
Additional
paid in capital |
Accumulated
other comprehensive income |
Accumulated
deficit |
Total APGL
shareholders deficit |
Non-
controlling interests |
Total
shareholders deficit |
|||||||||||||||||||||||||
Balance as of March 31, 2015 |
4,689,942 | 68 | (1,642,112 | ) | 23,192 | (2,828,302 | ) | (4,447,154 | ) | 4,575 | (4,442,579 | ) | ||||||||||||||||||||
Issuance of Series H CCPS |
3,695,407 | | | | | | | | ||||||||||||||||||||||||
Accretion of CCPS |
1,076,087 | | (1,076,087 | ) | | | (1,076,087 | ) | | (1,076,087 | ) | |||||||||||||||||||||
Net loss |
| | | | (1,052,767 | ) | (1,052,767 | ) | (8,633 | ) | (1,061,400 | ) | ||||||||||||||||||||
Other comprehensive loss |
| | | 4,846 | | 4,846 | | 4,846 | ||||||||||||||||||||||||
Adjustment to share capital and reserves of predecessor on transfer of net assets via a common control transaction |
| | (20,237 | ) | | | (20,237 | ) | | (20,237 | ) | |||||||||||||||||||||
Accretion of redeemable non-controlling interest |
| | | | (18,837 | ) | (18,837 | ) | | (18,837 | ) | |||||||||||||||||||||
Share based expenses |
| | 49,454 | | | 49,454 | 49,454 | |||||||||||||||||||||||||
Issuance of Equity Shares |
| | 340 | | 160 | 500 | (254 | ) | 246 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance as of December 31, 2015 |
9,461,436 | 68 | (2,688,640 | ) | 28,036 | (3,899,746 | ) | (6,560,282 | ) | (4,312 | ) | (6,564,594 | ) | |||||||||||||||||||
Balance as of December 31, 2015 (US$) |
142,944 | 1 | (40,620 | ) | 424 | (58,917 | ) | (99,113 | ) | (65 | ) | (99,177 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
F-47
Condensed Consolidated Statements of Cash Flows
(Rs. and US$ amounts in thousands)
(Unaudited)
Nine months ended December 31, | ||||||||||||
2014 | 2015 | 2015 | ||||||||||
(Rs.) | (Rs.) | US$ | ||||||||||
Cash flow from operating activities |
||||||||||||
Net loss |
(884,930 | ) | (1,061,400 | ) | (16,035 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||||||
Deferred income taxes |
49,714 | 29,084 | 439 | |||||||||
Depreciation and amortization |
218,016 | 495,647 | 7,488 | |||||||||
Change in Fair value of CCDs and Series E and G CCPS |
228,892 | 395,468 | 5,975 | |||||||||
Loss on disposal of property plant and equipment |
39 | 7,387 | 112 | |||||||||
Share based compensation |
5,340 | 49,454 | 747 | |||||||||
Amortization of debt financing costs |
12,907 | 33,838 | 511 | |||||||||
Realized gain on short term investments |
(10,054 | ) | (34,084 | ) | (515 | ) | ||||||
Deferred rent |
8,860 | 9,386 | 142 | |||||||||
Realized and unrealized foreign exchange loss, net |
368,631 | 337,112 | 5,093 | |||||||||
Operating profit before working capital changes |
||||||||||||
Changes in operating assets and liabilities |
||||||||||||
Accounts receivable |
48,566 | (316,942 | ) | (4,788 | ) | |||||||
Prepaid expenses and other current assets |
(64,788 | ) | (75,740 | ) | (1,144 | ) | ||||||
Other assets |
(241,746 | ) | (201,600 | ) | (3,046 | ) | ||||||
Accounts payable |
389,022 | 880,823 | 13,307 | |||||||||
Interest payable |
43,440 | 73,610 | 1,112 | |||||||||
Deferred revenue |
64,300 | 945,903 | 14,291 | |||||||||
Other liabilities |
306,538 | (38,882 | ) | (587 | ) | |||||||
|
|
|
|
|
|
|||||||
Net cash flows from operating activities |
542,747 | 1,529,064 | 23,102 | |||||||||
|
|
|
|
|
|
|||||||
Cash flow used in investing activities |
||||||||||||
Purchase of property plant and equipment |
(4,838,133 | ) | (6,468,552 | ) | (97,727 | ) | ||||||
Purchase of software |
(13,936 | ) | (6,970 | ) | (105 | ) | ||||||
Purchase of available for sale investments |
(586,212 | ) | (3,962,080 | ) | (59,859 | ) | ||||||
Sale of available for sale investments |
451,298 | 3,996,164 | 60,374 | |||||||||
Proceeds from sale of redeemable non-controlling interest in subsidiary |
| 316,929 | 4,788 | |||||||||
Investment in subsidiary |
| (20,180 | ) | (305 | ) | |||||||
Redemption/ maturity of term deposits-restricted cash |
(301,096 | ) | (1,046,688 | ) | (15,813 | ) | ||||||
|
|
|
|
|
|
|||||||
Net cash flows used in investing activities |
(5,288,079 | ) | (7,191,377 | ) | (108,647 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash from financing activities |
||||||||||||
Proceeds from issuance of Series F CCPS |
1,322,343 | | | |||||||||
Proceeds from issuance of Series H CCPS |
| 3,695,407 | 55,830 | |||||||||
Proceeds from issuance of equity shares |
| 250 | 4 | |||||||||
Repayments of term and other loan |
(255,736 | ) | (1,900,744 | ) | (28,716 | ) | ||||||
Proceeds from term and other loan |
4,942,280 | 5,020,768 | 75,854 | |||||||||
Proceeds from issuance of Series G CCPS |
| 541,946 | 8,188 | |||||||||
Proceeds from issuance of CCDs |
180,000 | | | |||||||||
|
|
|
|
|
|
|||||||
Net cash flow from financing activities |
6,188,887 | 7,357,627 | 111,160 | |||||||||
|
|
|
|
|
|
|||||||
Effect of exchange rate changes on cash and cash equivalents |
3,723 | 4,846 | 73 | |||||||||
Net increase in cash and cash equivalents |
1,447,278 | 1,700,160 | 25,686 | |||||||||
Cash and cash equivalents at the beginning of the period |
1,599,067 | 2,044,290 | 30,885 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents at the end of the period |
3,046,345 | 3,744,450 | 56,571 | |||||||||
|
|
|
|
|
|
See accompanying notes.
F-48
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
1. Organization
Azure Power Global Limited (APGL or Azure) organized under the laws of Mauritius was incorporated on January 30, 2015. APGLs subsidiaries are organized under the laws of India (except for two U.S. subsidiaries) and are engaged in the development, construction, ownership, operation, maintenance and management of solar power plants and generation of solar energy based on long-term contracts (power purchase agreements or PPA) with Indian government energy distribution companies as well as other non-governmental energy distribution companies and commercial customers. APGL and its subsidiaries are hereinafter referred to as the Company.
Formation and initial public offering (IPO)
Prior to the formation of Azure Power Global Limited (APGL) and the reorganization described below, the Companys operations were entirely conducted through Azure Power India Private Limited (AZI) and its subsidiaries. AZI is a company organized under the laws of India. APGL was formed to enable the consummation of the transactions described below and this IPO.
Pursuant to a shareholders agreement on July 22, 2015 between APGL, the non-founder investors in AZI and the founders (the APGL SHA), APGL purchased from the non-founder investors in AZI the equity shares and convertible securities in the form of Compulsorily Convertible Debentures (CCDS) and Compulsorily Convertible Preferred Shares (CCPS) held by them in AZI for an equivalent number of equity shares, CCDS and CCPS in APGL on substantially similar terms as those formerly held in AZI (the Reorganization).
Prior to the Reorganization, the non-founder investors had an 86% ownership interest, on an as converted basis (excluding the CCDS and CCPS which convert into a variable and currently indeterminable number of equity shares), in AZI with the balance held by the AZI founders. Subsequent to the Reorganization, APGL held an 86% interest in AZI, on an as converted basis, with the balance remaining with the founders of AZI. As a result of the Reorganization, the non-founder investors also held an 86% ownership interest in APGL, on an as converted basis, with the balance held by the founders. As of the date hereof, APGL hold approximately 94% of AZI on an as converted basis.
On July 22, 2015, APGL, AZI and the founders entered into another shareholders agreement (the AZI SHA), which provides that it is the intention of all parties to the AZI SHA to eventually make AZI a wholly owned subsidiary of APGL. As such, pursuant to the AZI SHA, APGL has an indefinite option requiring the AZI founders to sell their shareholding in AZI to APGL at the minimum applicable price as per Indian law. In addition, the AZI SHA prohibits a transfer of AZI equity shares held by the founders without the consent of APGL. Furthermore, the AZI founders and the non-founder investors entered into a Sponsor Lock-in Agreement (Lock-in Agreement) whereby the APGL founders cannot dispose of their shares in APGL to the extent of value of their shareholding in AZI until the occurrence of a termination event, as defined, including if the IPO of APGL is not completed by December 31, 2015. Any excess return earned by the founders upon disposal of their shareholding above the face value plus taxes incurred on transfer of such shares is to be distributed among the founders and non-founders pro rata based on their as converted shareholding in APGL, provided a termination event has not occurred. The non-founder investors and founders have agreed in principle to extend the lock in period, including the period for sharing the excess returns till the completion of APGLs IPO.
The APGL SHA, AZI SHA and their combined effect, including the call option and the Lock-In Agreement, replicated the founders and the non-founder investors interests in AZI in APGL on a substantially cash neutral basis and without any gain/loss by one party at the expense of another party. To reflect the economic substance
F-49
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
of the APGL SHA, the AZI SHA and the Reorganization, the Company has prepared the Condensed consolidated financial statements as though it had been combined with AZI since the earliest period presented, using the pooling of interests method of accounting with the assets and liabilities of the entities recorded at their historical carrying values. Similarly, no value has been attributed to the non-controlling interest still held by the AZI founders in AZI.
2. Summary of significant accounting policies
(a) | Basis of presentation |
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and are presented in Indian Rupees (Rs.), unless otherwise stated. The condensed consolidated financial statements include the accounts of APGL and companies which are directly or indirectly controlled by APGL. All intercompany accounts and transactions have been eliminated upon consolidation.
Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Companys historical consolidated financial statements and accompanying notes included in the Form F-1 Registration Statement. In the opinion of management, all adjustments, consisting of a normal recurring nature, considered for a fair presentation have been included in the condensed consolidated financial statements. The operating results for the nine months ended December 31, 2015 are not necessarily indicative of the results expected for the full year ending March 31, 2016.
(b) | Use of estimates |
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs, expenses and comprehensive loss that are reported and disclosed in the consolidated financial statements and accompanying notes. These estimates are based on managements best knowledge of current events, historical experience, actions the Company may undertake in the future and on various other assumptions that are believed to be prudent and reasonable under the circumstances. Significant estimates and assumptions are used for, but not limited to impairment of and useful lives of property, plant and equipment, determination of asset retirement obligations, valuation of derivative instruments, valuation of share based compensation, valuation of compulsorily convertible debentures and preferred shares, income taxes, and other contingencies and commitments. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates, and such differences may be material to the condensed consolidated financial statements.
(c) | Foreign currency translation and transactions |
The functional currency of APGL is the United States Dollar (US$) and reporting currency is Indian rupees (Rs.). The Companys subsidiaries with operations in India and the United States use their respective currencies as their functional currencies. The financial statements of APGL and its subsidiaries, other than subsidiaries with functional currency of Rs., are translated into Rs. using the exchange rate as of the balance sheet date for assets and liabilities and average exchange rate for the year for income and expense items. Translation gains and losses are recorded in accumulated other comprehensive income or loss as a component of shareholders equity.
F-50
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
In the financial statements of the Companys subsidiaries, transactions in currencies other than the functional currency are measured and recorded in the functional currency using the exchange rate in effect at the date of the transaction. At the balance sheet date, monetary assets and liabilities that are denominated in currencies other than the functional currency are translated into the functional currency using the exchange rate at the balance sheet date. All gains and losses arising from foreign currency transactions are recorded in the determination of net income or loss during the year in which they occur.
(d) | Convenience translation |
Translation of balances in the condensed consolidated balance sheets and the condensed consolidated statements of operations, comprehensive loss, shareholders deficit and cash flows from Rs. into US$, as of and for the nine months period ended December 31, 2015 are solely for the convenience of the readers and were calculated at the rate of US$1.00 = Rs. 66.19, the noon buying rate in New York City for cable transfers in non U.S. currencies, as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2015. No representation is made that the Rs. amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2015, or at any other rate.
(e) | Cash and cash equivalents |
Cash and cash equivalents include cash on hand, demand deposits with banks, term deposits and all other highly liquid investments purchased with an original maturity of three months or less at the date of acquisition and that are readily convertible to cash. The Company has classified term deposits totaling Rs. 95,416 and Rs. 662,559 (US$10,010) at March 31, 2015 and December 31, 2015, respectively, as cash and cash equivalents, because the Company has the ability to redeem these deposits at any time subject to an immaterial interest rate forfeiture. All term deposits are readily convertible into known amount of cash with no more than one days notice.
(f) | Restricted cash |
Restricted cash consists of cash balances restricted as to withdrawal or usage and relates to cash used to collateralize bank letters of credit supporting the purchase of equipment for solar power plants, bank guarantees issued in relation to the construction of the solar power plants within the timelines stipulated in PPAs and for certain debt service reserves required under the Companys loan agreements. Restricted cash is classified into current and non-current portions based on the term of the deposit and the expiration date of the underlying restriction.
(g) | Investments |
Management determines the appropriate classification of investment securities at the time of purchase and re-evaluates such designation at each balance sheet date. The investment securities held by the Company during the periods presented in the accompanying condensed consolidated financial statements are classified as available-for-sale (short-term investments) and consist of liquid mutual funds units.
The Company accounts for its investments in accordance with Financial Accounting Standards Board (FASB) ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities. These investments are considered available for sale and are recorded at fair value, with the unrealized gains or losses, net of tax, reported as a component of accumulated other comprehensive loss in the consolidated statement of shareholders
F-51
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
deficit. As of March 31, 2015 and December 31, 2015, the Company did not have any short-term investments. Realized gains and proceeds from the sale of available for sale securities during the nine months ended December 31, 2014 were Rs. 10,054 and Rs.451,298 and during the nine months ended December 31, 2015 were Rs. 34,084 (US$515) and Rs. 3,996,164 (US$60,374), respectively.
Realized gains and losses, and decline in value judged to be other than temporary on available-for-sale securities are included in the condensed consolidated statements of operations. The cost of securities sold or disposed is determined on First in First out (FIFO) method.
(h) | Accounts receivable |
The Companys accounts receivables are generated by selling energy to customers and are reported net of any allowance for uncollectible accounts. The allowance for doubtful accounts is based on various factors, including the length of time receivables are past due, significant one-time events, the financial health of customers and historical experience. The allowance for doubtful accounts at March 31, 2015 and December 31, 2015 was Rs. 10,000 (US$151). Accounts receivable serve as collateral for borrowings under the working capital facility, described in Note 9.
(i) | Deferred IPO cost |
The Company incurred legal and printing costs relating to its planned IPO of Rs. 88,400 and Rs. 172,709 (US$2,609) as of March 31, 2015 and December 31, 2015, respectively. The Company accounts for such costs under ASC 340-10-599-1 (SAB Topic 5A) Expenses of the Offering as incremental costs directly attributable to an offering of equity shares and has capitalized such costs on its condensed consolidated balance sheet. These costs will be applied against the proceeds from the IPO, when received.
(j) | Property, plant and equipment |
Property, plant and equipment represents the costs of completed and operational solar power plants, as well as the cost of furniture and fixtures, vehicles, office and computer equipment, leasehold improvements, freehold land and construction in progress. Construction in progress represents the accumulated cost of solar power plants that have not been placed into service at the date of the balance sheet. Construction in progress includes the cost of solar modules for which the Company has taken legal title, civil engineering, electrical and other related costs incurred during the construction of a solar power plant. Construction in progress is reclassified to property, plant and equipment when the project begins its commercial operations.
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Depreciation is calculated using the straight-line method over the assets estimated useful lives as follows:
Plant and machinery (solar power plants) |
25 years | |||
Furniture and fixtures |
5 years | |||
Vehicles |
5 years | |||
Office equipment |
5 years | |||
Computers |
3 years |
Leasehold improvements to office facilities are depreciated over the shorter of the lease period or the estimated useful life of the improvement. Lease hold improvements on the solar power plant sites are depreciated
F-52
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
over the shorter of the lease term or the remaining period of the PPAs undertaken with the respective customer. Freehold land is not depreciated. Construction in progress is not depreciated until it is ready to be put to use.
Improvements to property, plant and equipment deemed to extend the useful economic life of an asset are capitalized. Maintenance and repairs that do not improve efficiency or extend the estimated economic life of an asset are expensed as incurred.
Capitalized interest
Interest incurred on funds borrowed to finance construction of solar power plants is capitalized until the plant is ready for its intended use.
The amount of interest capitalized during the nine months ended December 31, 2014 and December 31, 2015 was Rs. 60,438 and Rs. 144,217 (US$2,179), respectively.
(k) | Accounting for impairment of long-lived assets |
The Company periodically evaluates whether events have occurred that would require revision of the remaining useful life of property, plant and equipment and improvements, or render their carrying value not recoverable. If such circumstances arise, the Company uses an estimate of the undiscounted value of expected future operating cash flows to determine whether the long-lived assets are impaired. If the aggregate undiscounted cash flows are less than the carrying amount of the assets, the resulting impairment charge to be recorded is calculated based on the excess of the carrying value of the assets over the fair value of such assets, with the fair value determined based on an estimate of discounted future cash flows, appraisals or other valuation techniques. There were no impairment charges related to long-lived assets recognized during the nine months ended December 31, 2014 and 2015.
(l) | Leases and land use rights |
The Companys leases relate to leasehold land on which the solar power plants are constructed and for office facilities. Leases are reviewed for capital or operating classification at their inception under the guidance of ASC Topic 840 Leases . The expense for leases classified as operating leases is recorded as rent expense on a straight-line basis, over the lease term, beginning with the date the Company has access to the property.
Land use rights represent lease prepayments to the lessor. Land use rights are carried at cost less accumulated amortization. Amortization is provided to write-off the cost of these prepayments on a straight-line basis over the period of the lease or the PPA, whichever is shorter.
The Company did not have any capital leases during any of the periods presented in the accompanying condensed consolidated financial statements.
(m) | Asset retirement obligations (ARO) |
Upon the expiration of a PPA or, if later, the expiration of the lease agreement for solar power plants located on leasehold land, the Company is required to remove the solar power plant and restore the land. The Company records the fair value of the liability for the legal obligation to retire the asset in the period in which the obligation is incurred, which is generally when the asset is constructed. When a new liability is recognized, the Company capitalizes it by increasing the carrying amount of the related long-lived asset, which resulting ARO
F-53
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
asset is depreciated over the remaining useful life of the solar power plant. The liability is accreted and expensed to its present expected future value each period based on a credit adjusted risk free interest rate. Upon settlement of the obligation, the Company eliminates the liability and, based on the actual cost to retire, may incur a gain or loss.
The Companys asset retirement obligations were Rs. 70,942 and Rs. 92,513 (US$1,398) as of March 31, 2015 and December 31, 2015, respectively. The accretion expense incurred during the nine months ended December 31, 2014 and December 31, 2015 were Rs. 1,767 and Rs. 4,318 (US$65), respectively. There was no settlement of prior liabilities or revisions to the Companys estimated cash flows as of December 31, 2015.
(n) | Software |
The Company capitalizes certain internal software development cost under the provision of ASC Topic 350-40 Internal-use Software . As of December 31, 2015, the amount capitalized as software includes the cost of software licenses, as well as related implementation costs, which primarily relate to third party consulting fees. Such license and implementation costs are capitalized and amortized over their estimated useful lives of three years using the straight-line method. On an ongoing basis, the Company assesses the recoverability of its capitalized software intangible assets. Capitalized software costs determined to be unrecoverable are expensed in the period in which the determination is made. As of December 31, 2015, all capitalized software was considered fully recoverable.
(o) | Debt financing costs |
Financing costs incurred in connection with obtaining construction and term financing loans are deferred and amortized over the term of the respective loan using the effective interest rate method. Amortization of debt financing costs is capitalized during construction and recorded as interest expense in the condensed consolidated statements of operations, following commencement of commercial operations of the respective solar power plants.
Amortization of debt financing costs for the nine months ended December 31, 2014 and 2015 was Rs.12,907 and Rs.33,838 (US$511), respectively.
(p) | Income taxes |
Income taxes are recorded under the asset and liability method, as prescribed under ASC Topic 740 Income Taxes , whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax base. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The Company establishes valuation allowances against its deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized.
The Company applies a two-step approach to recognize and measure uncertainty in income taxes in accordance with FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes an interpretation of ASC Topic 740 . The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit,
F-54
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement through December 31, 2015, the Company does not have any unrecognized tax benefits nor has it recognized any interest or penalties.
(q) | Employee benefits |
Defined contribution plan
Eligible employees of the Company in India receive benefits from the Provident Fund, administered by the Government of India, which is a defined contribution plan. Both the employees and the Company make monthly contributions to the Provident Fund equal to a specified percentage of the eligible employees salary.
The Company has no further funding obligation under the Provident Fund, beyond the contributions elected or required to be made thereunder. Contributions to the Provident Fund by the Company are charged to expense in the period in which services are rendered by the covered employees and amounted to Rs. 3,819 and Rs. 7,979 (US$121) for the nine months ended December 31, 2014 and 2015, respectively.
Defined benefit plan
Employees in India are entitled to benefits under the Gratuity Act, a defined benefit post-employment plan covering eligible employees of the Company. This plan provides for a lump-sum payment to eligible employees at retirement, death, and incapacitation or on termination of employment, of an amount based on the respective employees salary and tenure of employment. As of December 31, 2015, this plan is unfunded.
Current service costs for defined benefit plans are accrued in the period to which they relate. In accordance with ASC Topic 715, Compensation Retirement Benefit , the liability in respect of defined benefit plans is calculated annually by the Company using the projected unit credit method and amounted to Rs. 7,105 and Rs. 8,068 (US$122) as of March 31, 2015 and December 31, 2015, respectively. Prior service cost, if any, resulting from an amendment to a plan is recognized and amortized over the remaining period of service of the covered employees. Interest costs as of March 31, 2015 and December 31, 2015 were not significant.
The Company recognizes its liabilities for compensated absences in accordance with ASC Topic 710, Compensation-General . The Company accrues the liability for its employee rights to compensated absence in the year in which it is earned.
(r) | Revenue recognition |
Revenue from sale of power is recognized when persuasive evidence of an arrangement exists, the fee is fixed or determinable, solar energy kilowatts are supplied and collectability is reasonably assured. Revenue is based on the solar energy kilowatts actually supplied to customers multiplied by the rate per kilo-watt hour agreed to in the respective PPAs. The solar energy kilowatts supplied by the Company are validated by the customer prior to billing and recognition of revenue.
Where PPAs include scheduled price changes, revenue is recognized at lower of amount billed or by applying the average rate to the energy output estimated over the term of the PPA. The determination of the lesser amount is undertaken annually based on the cumulative amount that would have been recognized had each method been consistently applied from the beginning of the contract term. The Company estimates the total
F-55
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
kilowatt hour units expected to be generated over the entire term of the PPA. The contractual rates are applied to this annual estimate to determine the total estimated revenue over the term of the PPA. The Company then uses the total estimated revenue and the total estimated kilo-watt hours to compute the average rate used to record revenue on the actual energy output supplied. The Company compares the actual energy supplied to the estimate of the energy expected to be generated over the remaining term of the PPA on a periodic basis, but at least annually. Based on this evaluation, the Company reassesses the energy output estimated over the remaining term of the PPA and adjusts the revenue recognized and deferred to date. Through December 31, 2015, the adjustments have not been significant. The difference between actual billing and revenue recognized is recorded as deferred revenue.
For the nine months ended December 31, 2014 and 2015, the amount of revenue recognized under the PPAs with scheduled price changes is Rs. 125,987 and Rs. 121,729 (US$1,839), respectively.
Revenue from sale of power is recorded net of discounts. Through December 31, 2015, discounts have not been significant.
The Company records the proceeds received from Viability Gap Funding (VGF) on fulfilment of the underlying conditions as deferred revenue. Such deferred VGF revenue is recognised as sale of power in proportion to the actual sale of solar energy kilowatts during the period to the total estimated sale of solar energy kilowatts during the tenure of the applicable power purchase agreement pursuant to the revenue recognition policy.
(s) | Cost of operations (exclusive of depreciation and amortization) |
The Companys cost of operations consists of expenses pertaining to operations and maintenance of its solar power plants. These expenses include payroll and related costs for maintenance staff, plant maintenance, insurance, and if applicable, lease costs.
Depreciation expense is not included in cost of operations but is included within Depreciation and amortization expense, shown separately in the condensed consolidated statements of operations.
(t) | General and administrative expenses |
General and administrative expenses include payroll and related costs for corporate, finance and other support staff, including bonus and share based compensation expense, professional fees and other corporate expenses.
(u) | Share based compensation |
The Company follows guidance under ASC Topic 718, Compensation Stock Compensation , which requires compensation costs related to share-based transactions, including employee share options, to be recognized in the financial statements based on their fair value. The Company recognizes compensation expense for equity share options net of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Share-based compensation is included in general and administrative expenses and recognized in the condensed consolidated statements of operations for the nine months ended December 31, 2014 and 2015 based on awards ultimately expected to vest.
F-56
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
The Company has elected to use the Black-Scholes-Merton valuation model to determine the fair value of share-based awards on the date of grant for employee share options with a fixed exercise price and fixed service-based vesting.
The Company has elected to use the Lattice valuation model to determine the fair value of share-based awards on the date of grant for employee share options with a market condition.
Refer note 18 for details on the Share based compensation.
(v) | Contingencies |
Liabilities for loss contingencies arising from claims, tax assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Legal costs incurred with respect to these items are expensed as incurred.
(w) | Fair value of financial instruments |
ASC Topic 820, Fair Value Measurements and Disclosures , defines fair value as the price at which an asset could be exchanged or a liability transferred in an orderly transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or derived from such prices. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments complexity.
(x) | Derivative instruments |
Derivative instruments are recorded on the consolidated balance sheets at fair value. Changes in fair value of derivatives not designated as accounting hedges are reported directly in earnings along with the corresponding transaction gains and losses on the items being hedged. The Company enters into foreign exchange currency contracts to mitigate and manage the risk of changes in foreign exchange rates. These foreign exchange derivative contracts were entered into to hedge the fluctuations in foreign exchange rates for recognized balance sheet items such as the Companys U.S. dollar denominated borrowings and are not designated as hedges for accounting purposes. Realized gains (losses) and changes in the fair value of these foreign exchange derivative contracts are recorded in foreign exchange gains (losses), net in the consolidated statements of operations. These derivatives are not held for speculative or trading purposes. The Company did not have any derivatives designated as accounting hedges during the nine months ended December 31, 2014 and 2015.
(y) | Segment information |
Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Companys chief executive officer is the chief operating decision maker. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that it has a single operating and reporting segment: Sale of power. The Companys principal operations, revenue and decision-making functions are located in India.
F-57
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
(z) | Non-controlling interest |
The non-controlling interest recorded in the financial statements relates to (i) a 20% ownership in a subsidiary (10MW Gujarat Power Plant) not held by the Company and (ii) a 0.01% ownership in AZI not held by the Company or the sponsor directly.
The redeemable non-controlling interest recorded in the financial statements relates to a 29% ownership in a subsidiary (50MW Andhra Pradesh Power Plant) not held by the Company. The investor representing redeemable non-controlling interest has a put option to sell its equity interest to the Company for cash at the lower of fair value or a return of 11.5% after March 5, 2019. This non-controlling interest is considered to be redeemable equity under ASC 480-10-S99-3A. Therefore, it is classified as mezzanine equity in the Companys condensed consolidated balance sheet. The Company has adjusted the carrying amount of its redeemable non-controlling interest to its expected redemption value of Rs. 335,765 (US$5,073) at December 31, 2015 based on the guaranteed return which is less than fair value.
As of March 31, 2015, the Company recorded a non-controlling interest amounting to Rs. 4,575 including Rs. 5,595 of net loss for the year then ended. As of December 31, 2015, the Company recorded a non-controlling deficit amounting to Rs. 4,312 (US$65), including loss of Rs. 8,633 (US$130) for the nine months ended December 31, 2015.
3. Cash and cash equivalents
Cash and cash equivalents consist of the following:
March 31, | December 31, | |||||||||||
2015
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Bank demand deposits |
1,948,823 | 3,081,874 | 46,561 | |||||||||
Term deposits |
95,416 | 662,559 | 10,010 | |||||||||
Cash on hand |
51 | 17 | | |||||||||
|
|
|
|
|
|
|||||||
Total |
2,044,290 | 3,744,450 | 56,571 | |||||||||
|
|
|
|
|
|
4. Restricted cash
Restricted cash consists of the following:
March 31, 2015
(Rs.) |
December 31, | |||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||
Bank demand deposits |
542,484 | 642,547 | 9,707 | |||||||||
Term deposits |
760,717 | 1,707,343 | 25,795 | |||||||||
|
|
|
|
|
|
|||||||
1,303,201 | 2,349,890 | 35,502 | ||||||||||
Restricted cash current |
702,407 | 1,679,005 | 25,366 | |||||||||
|
|
|
|
|
|
|||||||
Restricted cash non-current |
600,794 | 670,885 | 10,136 | |||||||||
|
|
|
|
|
|
The increase in the restricted cash balance from March 31, 2015 to December 31, 2015 is primarily the result of increases in debt service reserve requirements resulting from the increase in the level of the Companys
F-58
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
borrowings during the period and additional cash used as collateral for letters of credit, as a result of an increase in the level of solar power plant construction at December 31, 2015 as compared to the prior period.
5. Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of the following:
March 31, 2015
(Rs.) |
December 31, | |||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||
Prepaid income taxes |
69,207 | 69,815 | 1,055 | |||||||||
Derivative instruments (Note 20) |
75,750 | 102,204 | 1,544 | |||||||||
Debt financing costs |
35,973 | 54,836 | 828 | |||||||||
Interest receivable on term deposits |
10,537 | 23,699 | 358 | |||||||||
Other |
49,263 | 65,916 | 996 | |||||||||
|
|
|
|
|
|
|||||||
Total |
240,730 | 316,470 | 4,781 | |||||||||
|
|
|
|
|
|
6. Property, plant and equipment, net
Property, plant and equipment, net consist of the following:
Estimated
Useful Life (in years) |
March 31,
2015 (Rs.) |
December 31, | ||||||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||||||
Plant and machinery (solar power plants) |
25 | 8,793,975 | 16,398,954 | 247,756 | ||||||||||||
Furniture and fixtures |
5 | 4,791 | 5,012 | 76 | ||||||||||||
Vehicles |
5 | 10,274 | 10,266 | 155 | ||||||||||||
Office equipment |
5 | 5,083 | 7,745 | 117 | ||||||||||||
Computers |
3 | 12,595 | 16,635 | 251 | ||||||||||||
Leasehold improvements solar power plant |
25 | 639,765 | 1,300,750 | 19,652 | ||||||||||||
Leasehold improvements office |
1-3 | 11,738 | 12,856 | 194 | ||||||||||||
|
|
|
|
|
|
|||||||||||
9,478,221 | 17,752,218 | 268,201 | ||||||||||||||
Less: Accumulated depreciation |
770,821 | 1,260,649 | 19,046 | |||||||||||||
|
|
|
|
|
|
|||||||||||
8,707,400 | 16,491,569 | 249,155 | ||||||||||||||
Freehold land |
199,173 | 365,755 | 5,526 | |||||||||||||
Construction in progress |
6,239,101 | 4,201,342 | 63,474 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total |
15,145,674 | 21,058,666 | 318,155 | |||||||||||||
|
|
|
|
|
|
Depreciation expense on property, plant and equipment was Rs. 215,379 and Rs. 489,828 (US$7,400) for the nine months ended December 31, 2014 and 2015, respectively.
The Company has received a government grant for the construction of rooftop projects amounting to Rs. 11,700 and Rs. 16,900 (US$255) for the periods ended March 31, 2015 and December 31, 2015, respectively. The proceeds from this grant have been recorded as a reduction to the carrying value of the related rooftop projects.
F-59
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
7. Software, net consists of the following:
Estimated
Useful Life (in years) |
March 31,
2015 (Rs.) |
December 31, | ||||||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||||||
Software licenses and related implementation costs |
3 Years | 20,668 | 27,638 | 418 | ||||||||||||
Less: Accumulated amortization |
4,948 | 10,767 | 163 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Total |
15,720 | 16,871 | 255 | |||||||||||||
|
|
|
|
|
|
Aggregate amortization expense for software was Rs. 2,637 and Rs. 5,819 (US$88) for the nine months ended December 31, 2014 and 2015, respectively.
Estimated amortization expense for the three months ending March 31, 2016 and years ending March 31, 2017, 2018 and 2019 is Rs. 2,312, Rs. 9,031, Rs. 4,644 and Rs. 884 respectively.
8. Other assets
Other assets consist of the following:
March
31,
2015 (Rs.) |
December 31, | |||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||
Prepaid income taxes |
232,347 | 232,930 | 3,519 | |||||||||
Custom duty receivable |
30,742 | 8,777 | 133 | |||||||||
Derivative instruments (Note 20) |
158,338 | 124,627 | 1,883 | |||||||||
Debt financing costs |
242,622 | 352,256 | 5,322 | |||||||||
Interest receivable on term deposits |
53,989 | 74,048 | 1,119 | |||||||||
Security deposit to related party (Note 17) |
6,300 | 6,300 | 95 | |||||||||
Land use rights |
79,500 | 80,762 | 1,220 | |||||||||
Other |
16,986 | 24,577 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total |
820,824 | 904,277 | 13,662 | |||||||||
|
|
|
|
|
|
F-60
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
9. Long term debt
Long term debt consists of the following:
March 31,
2015 (Rs.) |
December 31, | |||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||
Compulsorily convertible debentures 5.0% DEG |
1,080,100 | 1,192,418 | 18,015 | |||||||||
Compulsorily convertible debentures 10.0% IFC |
391,500 | 439,322 | 6,637 | |||||||||
Compulsorily convertible debentures 0% IFC II |
116,100 | 126,534 | 1,912 | |||||||||
Compulsorily convertible debentures 5% IFC III |
210,900 | 220,579 | 3,333 | |||||||||
Series E compulsorily convertible preferred shares (140,000 shares) |
662,600 | 779,804 | 11,781 | |||||||||
Series G compulsorily convertible preferred shares (18,882 shares) |
| 581,962 | 8,792 | |||||||||
|
|
|
|
|
|
|||||||
2,461,200 | 3,340,619 | 50,470 | ||||||||||
|
|
|
|
|
|
|||||||
Secured term loans: |
||||||||||||
Foreign currency loans |
6,046,900 | 6,146,876 | 92,866 | |||||||||
Indian rupee loans |
9,224,518 | 10,891,984 | 164,556 | |||||||||
|
|
|
|
|
|
|||||||
15,271,418 | 17,038,860 | 257,422 | ||||||||||
Other secured bank loans: |
||||||||||||
Vehicle loans |
235 | | | |||||||||
|
|
|
|
|
|
|||||||
17,732,853 | 20,379,479 | 307,892 | ||||||||||
Less current portion |
2,254,344 | 4,160,794 | 62,860 | |||||||||
|
|
|
|
|
|
|||||||
Long-term debt |
15,478,509 | 16,218,685 | 245,032 | |||||||||
|
|
|
|
|
|
Compulsorily convertible debentures (CCDs)
The face value of the DEG, IFC, IFC II and IFC III CCDs is Rs. 680,390 (US$10,388), Rs. 246,620 (US$3,765), Rs.75,000 (US$1,145) and Rs. 180,000 (US$2,748), respectively. The CCDs each contain the following key terms and conditions.
Voting
The holders of the CCDs are not entitled to voting rights other than for certain specific matters based on their proportionate voting right as defined and specified in the shareholder and CCD agreement.
Term
Unless converted, the DEG, IFC, IFC II and IFC III CCDs mature 20 years from the date of the respective issuance being November 10, 2031, December 14, 2030, January 3, 2033 and September 5, 2034, respectively.
Interest
The DEG CCDs bear interest at a rate of 5.0% per annum through the date of their conversion into equity shares of the Company. The first interest payment is eighteen months from the issuance date followed by quarterly payments until the earlier of the date of conversion or maturity.
F-61
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
The IFC CCDs bear interest at a rate of 10.0% per annum through the date of their conversion into equity shares of the Company. The first interest payment is eighteen months from the issuance date followed by quarterly payments until the earlier of the date of conversion or maturity.
The IFC II CCDs do not carry an annual interest rate. However, if any dividends are paid to equity shareholders or the holders of the Compulsorily Convertible Preferred Shares (CCPS), the IFC II holders are entitled to interest/dividends equal to the return provided to the equity shareholders or the CCPs shareholders, whichever is higher.
The IFC III CCDs bear interest at a rate of 5.0% per annum through the date of their conversion into equity shares of the Company. The first interest payment is eighteen months from the issuance date followed by quarterly payments until the earlier of the date of conversion or maturity.
The CCDs convert at a price such that the holder earns an internal rate of return ranging from 18.4% per annum to 20.0% per annum upon the filing of prospectus as defined, in the event of liquidation events, as defined, or upon the voluntary sale of shares by all shareholders. Otherwise the guaranteed internal rate of return to the CCD holders ranges from 16.0% per annum to 18.0% per annum at maturity.
Buyback obligation
At any time after the expiry of the Qualified Initial Public Offering (QIPO) date of February 25, 2016, upon a breach of the funding requirements of the CCD holders or upon the occurrence of a liquidation event, as defined, the holders of the CCDs have an option, at their discretion, to require the Company to buyback the equity shares held by them after the conversion of their CCDs into equity shares so as to give them their required returns ranging from 18.4% per annum to 20.0% per annum.
Until March 31, 2015, these debentures were held by Azure Power India Private Limited. Indian rules and regulations place limitations on the amount of the CCDs the Company can buy back within 12 months of the balance sheet. Among other things, the Company is restricted from buying back an amount of shares in excess of 25% of its statutory paid up share capital and free reserves in a year. Accordingly amount totaling to Rs. 986,048 of the CCDs were eligible for redemption by February 25, 2016 and were accordingly classified as a current liability. As of December 31, 2015, these debentures are being held by Azure Power Global Limited, which has been incorporated in Mauritius. There are no restrictions applicable to Azure Power Global Limited and accordingly the debentures amounting to Rs. 1,978,853 (US$29,897) have been classified as current liability.
Conversion
The CCDs compulsorily convert to equity shares (a) upon listing of the Equity Shares, in connection with an IPO as approved by the shareholders of the Company, or (c) at the maturity date of the respective CCDs. The CCDs are convertible into equity shares so as to give the holders their guaranteed returns ranging from 16.0% per annum to 18.0% per annum.
Accounting
In accordance with ASC Topic 480 Distinguishing Liabilities from Equity , the CCDs are recorded at their respective fair values at period end. The fair value has been determined based on a discounted cash flow analysis under the income approach. Changes in their fair value are recorded as interest expense in the statements of
F-62
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
operations. The carrying amount of the CCDs includes the unrealized changes in the fair value of Rs. 616,590 and Rs. 796,843 (US$12,038) as of March 31, 2015 and December 31, 2015, respectively. Issuance costs on the CCDs are expensed as incurred.
Interest expense, including changes to fair value, on the CCDs for the nine months ended December 31, 2014 and 2015 was Rs. 273,293 and Rs. 231,246 (US$3,494), respectively.
Series E and G Compulsorily Convertible Preferred Shares (Series E and G CCPS)
On August 10, 2015, APGL issued shares of Series G CCPS for net proceeds of Rs. 541,946 (US$8,188).
Series E and G CCPS contain the following key terms and conditions, as amended.
Voting
The holders of the Series E and G CCPS are not entitled to voting rights other than for certain specific matters based on their proportionate voting right as defined and specified in the shareholder and the Series E and G CCPS agreements.
Term
Unless converted, the Series E and G CCPS are redeemable twenty years from the date of their respective allotment on April 18, 2033 and August 10, 2035, respectively.
Dividend
Each of the Series E and G CCPS holders are entitled to a 5.0% per share non-cumulative dividend, declared and paid in accordance with the Indian Companies Act of 2013. Should the equity or the Series A, B, C, D, F or H CCPS holder in any financial year receive a dividend payout higher than 5% per annum of the amount invested by such investors, the Series E and G CCPS holders are entitled to receive an additional dividend equal to the difference between the percentage return earned by the equity or the Series A, B, C, D, F or H CCPS holders and the rate of dividends received by the Series E and G CCPS holders. The Company has not declared or paid any dividends through December 31, 2015.
Buyback obligation
At any time after the expiry of the QIPO date of February 25, 2016, or if the funding covenants of the Series E and G CCPS are breached, the Series E and G CCPS holders have an option, at their discretion, to require the Company to buyback the equity shares held by them after conversion of the Series E and G CCPS into equity shares so as to give them a required return of 15.0% per annum and 8% per annum respectively.
Conversion
The Series E and G CCPS compulsorily convert to equity shares (a) upon listing of the Equity Shares, in connection with an IPO as approved by the shareholders of the Company, or (c) at their maturity date. The Series E and G CCPS are convertible into equity shares so as to give the holders their required return which is 15% per annum and 16% per annum respectively if converted at maturity or 18.4% per annum upon the filing of a prospectus or of a QIPO.
F-63
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Liquidation
On the occurrence of a liquidation event, as defined in the term of the Series E and G CCPS agreement, the Series E and G CCPS holders have the right to receive an amount equal to their original investment plus a guaranteed internal rate of return of 18.4% per annum. At December 31, 2015, the Series E and G CCPS liquidation preference was Rs. 1,361,766 (US$20,574).
Accounting
In accordance with ASC Topic 480, the Series E and G CCPS are classified as a liability and recorded at fair value at each period end. The fair value has been determined based on a discounted cash flow analysis under the income approach. Changes in their fair value are recorded as interest expense in the statements of operations. The carrying amount of series E and G CCPS includes the unrealized changes in their fair value of Rs. 171,200 and Rs. 328,438 (US$4,962) as of March 31, 2015 and December 31, 2015, respectively. Issuance costs on the CCPS are expensed as incurred. As of December 31, 2015, the Series E and G CCPS have been classified as current liabilities.
Project level secured term loans
Foreign currency loans
From June 2009 through September 2009 the Company borrowed Rs. 309,631 (US$6,230) for the financing of a 2 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 48 equal quarterly installments which commenced on December 15, 2010. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 312,792 (US$4,726) as of December 31, 2015.
From February 2011 through June 2011, the Company borrowed Rs. 1,233,084 (US$26,835) for the financing of a 10 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 54 equal quarterly installments which commenced on September 15, 2012. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,149,570 (US$17,368) as of December 31, 2015.
From October 2011 through March 2012, the Company borrowed Rs. 782,793 (US$15,777) for the financing of a 5 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 66 quarterly installments commencing July 15, 2012. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 657,309 (US$9,931) as of December 31, 2015.
From October 2012 through September 2013, the Company borrowed Rs. 3,503,984 (US$63,709) for the financing of a 35 MW solar power project, which loan carries a fixed interest rate. The loan is repayable in 36 semi-annual installments which commenced on August 20, 2013. The borrowing is collateralized by underlying solar power project assets with a net carrying value of Rs. 3,072,364 (US$46,417) as of December 31, 2015.
The fixed interest foreign currency loans carry an interest rate ranging from 4.07% to 6.43% per annum.
During the year ended March 31, 2015, the Company entered into an unsecured credit facility commitment for financing future rooftop solar power projects. The total amount of the facility is Rs. 1,326,520 (US$20,000). The interest rate for the facility is fixed at lenders base rate plus 2.25% per annum at the time of first
F-64
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
disbursement. The tenure of the facility is 10 years from the date of first disbursement. During the period ended December 31, 2015, no amounts have been borrowed under this facility and the Company has incurred deferred financing cost of Rs. 11,632 (US$176) in relation to this facility.
The carrying value of the foreign currency loans includes unrealized foreign exchange losses of Rs. 1,161,739 and Rs. 1,553,642 (US$ 23,472.) as of March 31, 2015 and December 31, 2015, respectively.
The Company in required to maintain principal and interest, both as defined in the respective agreements, as a reserve with banks specified by the respective lenders. Such amounts, totaling Rs. 397,884 and Rs. 395,166 (US$5,970) at March 31, 2015 and December 31, 2015, are classified as restricted cash non-current on the condensed consolidated balance sheets.
The foreign currency loans are subject to certain financial and non-financial covenants. Financial covenants include cash flow to debt service, indebtedness to net worth ratio, debt equity ratio and maintenance of debt service balances. As of March 31, 2014, the Company was not in compliance with certain of these covenants and accordingly the Company had classified the respective loans totaling Rs. 1,668,952 (US$25,480) as current liability. On September 22, 2015, the Company received a waiver from the lender regarding all past breaches of these loan covenants, as a result of which, the aforementioned loans have been classified as non-current as of December 31, 2015. Further, the lender has adjusted the covenant thresholds for certain financial covenants through April 1, 2017. As of December 31, 2015, the Company is in compliance with all such covenants.
Indian rupee loans
In December 2013, the Company borrowed Rs. 143,740 (US$2,195) for the financing of a 2.5 MW solar power project, which loan carries an interest rate of 12.16% per annum to be periodically revised by the lender. The interest rate as of December 31, 2015 was 12.16% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.16% per annum. The loan is repayable in 29 semi-annual installments which commenced on January 15, 2014. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 150,237 (US$2,270) as of December 31, 2015.
From March 2014 through September 2015, the Company borrowed Rs. 183,726 (US$2,805) for financing of a 1.5 MW solar rooftop power project, which loan carries an interest rate at a base rate, as defined, plus 2.25% per annum. The interest rate as of December 31, 2015 was 12.50% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.50% per annum. The loan is repayable in 54 quarterly installments commencing on March 28, 2015. The borrowing is collateralized by the underlying solar rooftop power project assets with a net carrying value of Rs. 169,589 (US$2,562) as of December 31, 2015.
From March 2014 through September 2014, the Company borrowed Rs. 1,880,000 (US$28,702) for financing of a 34 MW solar power project, which borrowings carry a floating rate of interest at a base rate, as defined, plus 2.25% per annum. The floating interest rate as of December 31, 2015 was 12.65% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.65 % per annum. The loan is repayable in 58 equal quarterly installments commencing July 1, 2015. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,866,781 (US$28,203) as of December 31, 2015.
In September 2014, the Company borrowed Rs. 550,000 (US$8,397) for financing of a 10 MW solar power project, which borrowings carry a floating rate of interest at a base rate, as defined, plus 2.25% per annum. The
F-65
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
floating interest rate as of December 31, 2015 was 12.75% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.75% per annum. The loan is repayable in 44 quarterly installments commencing January 27, 2016. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 567,546 (US$8,575) as of December 31, 2015.
From November 2014 through January 2015, the Company borrowed Rs. 585,000 (US$8931) for financing of a 10 MW solar power project, which borrowings carry a floating rate of interest to be periodically revised by the lender. The floating interest rate as of December 31, 2015 was 12.75% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.75% per annum. The loan is repayable in 58 quarterly installments commencing January 17, 2016. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 607,412 (US$9,177) as of December 31, 2015.
From May 2015 through June 2015, the Company borrowed Rs. 1,601,000 (US$24,188) for financing of a 30 MW solar power project, which borrowings carry a floating rate of interest at a base rate plus 1.5% per annum. The floating interest rate as of December 31, 2015 was 12% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.52% per annum. The loan is repayable in 57 quarterly instalments commencing December 31, 2015. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,777,864 (US$26,860) as of December 31, 2015.
From December 2014 through September 2015, the Company borrowed Rs. 2,050,000 (US$30,971) for financing of a 40 MW solar power project, which borrowings carry a floating rate of interest which will reset after every 2 years from the date of commissioning. The interest rate as of December 31, 2015 from a consortium of lenders was in the range of 11.76 % per annum to 12.65 % per annum floating with additional 1% per annum interest during the construction period. The weighted average interest rate for the nine months ended December 31, 2015 was 12.19 % per annum. The loan is repayable in 57 quarterly instalments commencing October 15, 2015. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 2,164,726 (US$32,470) as of December 31, 2015.
From December 2014 through September 2015, the Company borrowed Rs. 2,363,100 (US$35,702) for financing of a 40 MW solar power project, which borrowings carry a floating rate of interest which will reset after every 2 years from the date of commissioning. The interest rate as of December 31, 2015 from a consortium of lenders was 12.65% per annum floating with additional 1% per annum interest during construction period. The weighted average interest rate for the nine months December 31, 2015 was 13.65% per annum. The loan is repayable in 48 quarterly instalments commencing May 31, 2016. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 2,506,010 (US$37,867) as of December 31, 2015.
From December 2014 through September 2015, the Company borrowed Rs. 1,173,500 (US$17,729) for financing of a 20 MW solar power project, which borrowings carry a floating rate of interest which will reset after every 2 years from the date of commissioning. The interest rate as of December 31, 2015 from a consortium of lenders was 12.65% per annum floating with additional 1% per annum interest during the construction period. The weighted average interest rate for the nine months ended December 31, 2015 was 13.65% per annum. The loan is repayable in 48 quarterly instalments commencing May 31, 2016. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,252,733 (US$18,926) as of December 31, 2015.
In September 2015, the Company borrowed Rs. 1,233,000 (US$18,824) for financing of a 28 MW solar power project, which borrowings carry a floating rate of interest at a base rate, as defined, minus 2.75% per
F-66
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
annum. The floating interest rate as of December 31, 2015 was 12.50% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 12.50% per annum. The loan is repayable in 56 quarterly installments commencing January 31, 2017. The borrowing is collateralized by the underlying solar power project assets with a net carrying value of Rs. 1,398,480 (US$21,128) as of December 31, 2015.
As of December 31, 2015, the Company has unused commitments for long-term financing arrangements amounting to Rs. 6,958,419 (US$105,128) for solar power projects.
Short term loan facilities
Facility 1
In July 2015, the Company entered into a credit facility in the amount of Rs. 250,000 (US$3,777). Borrowings under this facility are repayable within 12 month of disbursement. The Company has pledged shareholding of a project subsidiary as collateral.
In July 2015, the Company borrowed Rs. 250,000 (US$3,777) for financing a 5 MW solar power project, which borrowings carry a floating rate of interest as defined, plus 4.5% per annum and is collateralized by the assets created from the respective disbursement. The interest rate as of December 31, 2015 was 13.75% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 13.75% per annum. The loan is repayable within 12 months from the date of disbursement for the project.
Facility 2
In October 2015, the Company entered into a revolving credit facility in the amount of Rs. 1,000,000 (US$15,108). Borrowings under this facility are repayable within 18 month of disbursement. Two directors of AZI have given personal guarantees. The Company has also pledged shareholding of two project subsidiaries.
In November 2015, the Company borrowed Rs. 900,000 (US$13,726) for financing a 50 MW solar power project and repaid Rs 300,000 (4523) during the period. The interest rate as of December 31, 2015 was 14.00% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 14.00% per annum. The loan is repayable within 18 months from the date of disbursement for the project and is further collateralized by the assets created from the respective disbursement.
Facility 3
In September 2015, AZI entered into a revolving credit facility in the amount of Rs. 1,000,000 (US$15,108). Borrowings under this facility are repayable within 12 month of disbursement. Two directors of AZI have given personal guarantees. The Company has also pledged shareholding of two project subsidiaries.
In November 2015, the Company borrowed Rs. 480,000 (US$7,334) for financing a 10 MW solar power project. The interest rate as of December 31, 2015 was 13.50% per annum and the weighted average interest rate for the nine months ended December 31, 2015 was 13.50% per annum. The loan is repayable within 12 months from the date of 1st disbursement for the project and is further collateralized by the assets created from the respective disbursement.
In December 2015, the Company borrowed Rs. 418,000 (US$6,320) for financing a 10 MW solar power project. The interest rate as of December 31, 2015 was 13.50% per annum and the weighted average interest rate
F-67
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
for the nine months ended December 31, 2015 was 13.50% per annum. The loan is repayable within 12 months from the date of 1st disbursement for the project and is further collateralized by the assets created from the respective disbursement.
From time to time, the Company in required to maintain principal and interest, both as defined in the respective agreements, as a form of collateral with banks specified by the respective lenders. Such amounts, totaling Rs. 248,600 (US$3,756) as of December 31, 2015, are classified as restricted cash on the consolidated balance sheets. Generally, under the terms of the loan agreements entered into by the Companys project subsidiaries, the project subsidiaries are restricted from paying dividends to APGL if they default in payment of their principal, interest and other amounts due to the lenders under their respective loan agreements. Certain of APGLs project subsidiaries also may not pay dividends to AZI out of restricted cash.
The Indian rupee loans are subject to certain financial and non-financial covenants. Financial covenants include cash flow to debt service ratio, indebtedness to net worth ratio, debt equity ratio, debt service coverage ratio, receivable to sales ratio and maintenance of debt service balances. As of December 31, 2015, the Company is in compliance with all such covenants.
For certain of the Indian rupee loans, two of the directors of the Company have provided personal guarantees in favor of the lenders and have also pledged part of their shareholding with these lenders.
As of December 31, 2015, the aggregate maturities of long term debt (excluding CCDs, Series E and G CCPS) are as follows:
Annual maturities | ||||
(Rs.) | ||||
December 31, |
||||
2016 |
820,185 | |||
2017 |
1,115,932 | |||
2018 |
1,169,753 | |||
2019 |
1,213,416 | |||
2020 |
1,252,329 | |||
Thereafter |
11,467,245 | |||
|
|
|||
Total |
17,038,860 | |||
|
|
10. Income Taxes
The individual entities within the Company file individual tax returns as per the regulations existing in their respective jurisdictions.
The fiscal year under the Indian Income Tax Act ends on March 31. A portion of the Companys Indian operations qualify for deduction from taxable income because its profits are attributable to undertakings engaged in development of solar power projects under section 80-IA of the Indian Income Tax Act, 1961. This holiday is available for a period of ten consecutive years out of fifteen years beginning from the year in which the Company generates power (Tax Holiday Period). The Company anticipates that it will claim the aforesaid deduction in the last ten years out of fifteen years beginning with the year in which the Company generates power and when it has taxable income. Accordingly, its current operations are taxable at the normally applicable tax rates.
F-68
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Due to the Tax Holiday Period, a substantial portion of the temporary differences between the book and tax basis of the Companys assets and liabilities do not have any tax consequences as they are expected to reverse within the Tax Holiday Period.
AZI and a subsidiary provide services to other group subsidiaries and incur income taxes on profits from these services. These services are capitalizable by the subsidiaries and are hence capitalized as part of property, plant and equipment in the standalone financial statements of such subsidiaries and deducted in their respective income tax return in the form of depreciation expense. However, these capitalized costs are eliminated in the Companys consolidated financial statements. AZI treats the income tax it incurs on the provision of such services to its subsidiaries as prepaid income taxes to the extent the amounts are expected to be deductible by the subsidiaries in their tax returns outside of the Tax Holiday Period.
At March 31, 2015 and December 31, 2015, gross deferred tax assets were Rs. 77,788 and Rs. 683,071 (US$10,320), and gross deferred tax liabilities were Rs. 169,497 and Rs. 811,898 (US$12,266), respectively. Deferred income taxes been shown in the condensed consolidated balance sheet as follows:
March 31,
2015 (Rs.) |
December 31, | |||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||
Current assets |
22,453 | 77,283 | 1,168 | |||||||||
Non-current assets |
4,460 | 74,644 | 1,128 | |||||||||
Current liability |
998 | 600 | 9 | |||||||||
Non-current liability |
117,661 | 272,157 | 4,112 |
At December 31, 2015, the Company performed an analysis of the deferred tax asset valuation allowance for APGL and its Indian and US subsidiaries. Based on the analysis, the Company has concluded that a valuation allowance offsetting the deferred tax assets is required as of December 31, 2015 on the basis that it is more likely than not that APGL will not utilize the entirety of its net operating losses as it has no business operations of its own.
Change in the valuation allowance for deferred tax assets as of March 31, 2015 and December 31, 2015 is as follows:
March 31,
2015 (Rs.) |
December 31, | |||||||||||
2015
(Rs.) |
2015
(US$) |
|||||||||||
Opening valuation allowance |
61,129 | 37 | 1 | |||||||||
Movement during the period |
(61,092 | ) | 7,960 | 120 | ||||||||
Closing valuation allowance |
37 | 7,997 | 121 |
At December 31, 2014 and 2015, deferred income taxes have not been provided for the Companys share of undistributed net earnings of foreign operations due to managements intent to reinvest such amounts indefinitely. Those earnings totaled Rs. 27,584 and Rs. 23,252 (US$351) for nine months ended December 31, 2014 and 2015, respectively.
The Company had adopted the provisions of ASC Topic 740 as they relate to uncertain income tax positions. Tax exposures can involve complex issues and may require extended periods to resolve. The Company does not have any uncertain tax positions requiring to be reserved for. The Company reassesses its tax positions
F-69
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
in light of changing facts and circumstances, such as the closing of a tax audit, refinement of an estimate, or changes in tax codes. To the extent that the final tax outcome of these matters differs from the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made.
The effective income tax rate for the nine months ended December 31, 2014 and 2015 is 30.30% and 9.20%, respectively. The effective income tax rate differs from the amount computed by applying the Indian Income tax rate of 34.61% to loss before income taxes principally due to temporary differences reversing in the tax holiday period for which an income tax benefit has not been recognized.
11. Interest expense, net
Interest expense, net consists of the following:
Nine months ended December 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US) |
||||||||||
Interest expense: |
||||||||||||
CCDs |
202,051 | 238,113 | 3,597 | |||||||||
Series E and G CCPS |
71,242 | 157,355 | 2,377 | |||||||||
Term loans |
374,806 | 1,108,360 | 16,745 | |||||||||
Bank charges and other |
33,661 | 78,682 | 1,189 | |||||||||
|
|
|
|
|
|
|||||||
Sub total |
681,760 | 1,582,510 | 23,908 | |||||||||
Interest income: |
||||||||||||
Term and fixed deposits |
107,778 | 159,137 | 2,404 | |||||||||
Gain on sale of short term investments |
10,054 | 34,084 | 515 | |||||||||
|
|
|
|
|
|
|||||||
Sub total |
117,832 | 193,221 | 2,919 | |||||||||
|
|
|
|
|
|
|||||||
Total |
563,928 | 1,389,289 | 20,989 | |||||||||
|
|
|
|
|
|
12. Loss on foreign currency exchange
Loss on foreign currency exchange consists of the following:
Nine months ended December 31, | ||||||||||||
2014
(Rs.) |
2015
(Rs.) |
2015
(US$) |
||||||||||
Unrealized loss on foreign currency loans |
319,778 | 345,474 | 5,219 | |||||||||
Realized loss/ (gain) on foreign currency loans |
(6,304 | ) | (46,429 | ) | (701 | ) | ||||||
Unrealized (gain) on derivative instruments |
(13,527 | ) | (2,364 | ) | (36 | ) | ||||||
Realized loss/ (gain) on derivative instruments |
68,684 | 40,431 | 611 | |||||||||
|
|
|
|
|
|
|||||||
368,631 | 337,112 | 5,093 | ||||||||||
|
|
|
|
|
|
F-70
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
13. Equity and preferred shares
Equity shares
Equity shares have a par value of US$0.01 per share at APGL. There is no limit on the number of equity shares authorized. As of March 31, 2015 and December 31, 2015, there were 109,880 and 109,880 equity shares issued and outstanding.
Compulsorily Convertible Preferred Share
There is no limit on the number of preferred shares the Company can issue. As of December 31, 2015, the compulsorily convertible preferred shares (CCPS) consist of the following:
No of
Shares |
Total
consideration (Rs.) |
Price per share
(US$)* |
||||||||||
Series A |
38,770 | 92,492 | 49 | |||||||||
Series B |
181,046 | 503,994 | 61 | |||||||||
Series C |
229,880 | 381,600 | 34 | |||||||||
Series D |
84,348 | 474,964 | 102 | |||||||||
Series F |
138,133 | 1,550,508 | 184 | |||||||||
Series H |
133,285 | 3,840,339 | 450 | |||||||||
|
|
|
|
|||||||||
805,462 | 6,843,897 | |||||||||||
|
|
|
|
* | Not in thousands |
In November 2008, AZI had issued 38,770 Series A CCPS for consideration of Rs. 91,617, (net of Rs. 875 share issue expenses). In February 2010, AZI had issued 181,046 Series B CCPS for consideration of Rs. 500,731 (net of Rs. 3,263 share issue expenses). In September 2011, AZI had issued 229,880 Series C CCPS for consideration of Rs. 377,562 (net of Rs. 4,038 share issue expenses). In September 2012, AZI had issued 84,348 Series D CCPS for consideration of Rs. 474,964 (net of Rs. NIL share issue expenses). From June 2014 to January 2015 AZI had issued 138,133 series F CCPS for a total consideration of Rs. 1,549,010 (net of Rs. 1,498 share issue expenses). Unless converted, the term of the Series A CCPS is a maximum of 19 years from the date of issue, whereas the terms of the Series B, Series C, Series D and Series F CCPS is a maximum of 20 years, as amended, from the date of issue. On July 25, 2015, the Series A, Series B, Series C, Series D, and Series F CCPS in AZI were exchanged for similar instruments in APGL having identical terms and conditions.
On July 25, 2015, APGL issued 133,285 Series H CCPS for consideration of Rs. 3,695,407 (net of Rs. 144,932 share issuance expenses). Unless converted, the term of the Series H CCPS is a maximum of 20 years from the date of issue.
The rights, preferences and privileges of the Companys Series A, Series B, Series C ,Series D, Series F and Series H CCPS (collectively, the Mezzanine CCPS) are as follows:
Voting
The Mezzanine CCPS rank pari passu with regards to voting rights. Holders of Mezzanine CCPS are entitled to vote on all matters and are entitled to the number of votes equal to the number of equity shares into which the Mezzanine CCPS shares are then convertible on the basis of the applicable conversion factor.
F-71
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Dividend
Each of the Series A, Series B, Series C, Series D, Series F holders of the Mezzanine CCPS are entitled to a 8.0% per annum per share non-cumulative dividend and Series H CCPS is entitles to a 8% per annum per share cumulative dividend and thereafter they all participate pro rata on an as converted basis with the equity shareholders on any distributions made to the equity shareholders. The Company has not declared or paid any dividends through December 31, 2015.
Conversion
Each of the Series A, Series B, Series D, Series F and Series H CCPS are convertible into equity shares of the Company at the option of the CCPS holders at any time at a conversion ratio of 1:1. The Series C CCPS is convertible into equity shares of the Company at the option of the CCPS holder at any time at a conversion ratio of 1:0.3423. Any Mezzanine CCPS which have not been converted into equity shares of the Company are compulsorily converted into equity shares of the Company, at the aforementioned ratios, upon listing of shares on execution of a QIPO or at their maturity date.
Buyback
Should a buyback obligation not occur by February 25, 2016 or the funding covenants of the CCPS holders are breached, the Mezzanine CCPS holders may request the Company to buyback the CCPS at the following rates:
|
Series A CCPS 140% of the cash paid for the Series A CCPS, plus accrued and unpaid dividends |
|
Series B, Series C, and Series D CCPS 200% of the cash paid, plus accrued and unpaid dividends |
|
Series F CCPS 150% of the cash paid, for the Series F CCPS, plus accrued and unpaid dividends |
|
Series H CCPS 108% of the cash paid, for the Series H CCPS, plus accrued and unpaid dividends |
Buyback obligation of Series A, Series B, Series C, Series D, and Series F CCPS continues to be computed in Indian Rupees.
Liquidation
On occurrence of a liquidation event, as defined in the terms of the Mezzanine CCPS agreements, the Series A holders are eligible to receive an amount equal to 140% of the cash paid for the Series A CCPS, plus accrued and unpaid dividends, and the Series B, Series C, and Series D holders have the right to receive an amount equal to 200% of the cash paid, plus accrued and unpaid dividends, and the Series F holders have the right to receive an amount equal to 150% of the cash paid, plus accrued and unpaid dividends, and the Series H holders have the right to receive an amount equal to 108% of the cash paid, plus accrued and unpaid dividends. Upon such a liquidation event, the holders of the CCDs and Series E and G CCPS are entitled to receive amounts in preference to the Series B, Series C, Series D, Series F and Series H CCPS, who in turn receive amounts in preference to the holders of the Series A CCPS. Series A CCPS holders receive amounts in preference to the Companys equity shareholders.
F-72
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Liquidation preferences for each series of Mezzanine CCPS as of February 25, 2016 are as follows:
Liquidation
Preference |
(Rs.) | (US$) | ||||||||||
Series A |
140 | % | 129,488 | 1,956 | ||||||||
Series B |
200 | % | 1,007,988 | 15,229 | ||||||||
Series C |
200 | % | 763,202 | 11,530 | ||||||||
Series D |
200 | % | 949,927 | 14,352 | ||||||||
Series F |
150 | % | 2,325,763 | 35,138 | ||||||||
Series H |
108 | % | 3,975,534 | 60,062 | ||||||||
|
|
|
|
|||||||||
9,151,902 | 138,267 | |||||||||||
|
|
|
|
Accounting
The Company has evaluated its accounting for the Mezzanine CCPS pursuant to ASC Topic 480 and ASC Topic 815 Derivative and Hedging. The Mezzanine CCPS do not satisfy the criteria for liability classification described in ASC Topic 480. In addition, the embedded features of the Mezzanine CCPS do not satisfy the criteria for separate accounting of the derivative from the host instrument pursuant to ASC Topic 815. However, because the Mezzanine CCPS contain certain redemption features that are not solely within the Companys control, the Mezzanine CCPS are classified as temporary equity in the condensed consolidated balance sheets.
The Mezzanine CCPS are being accreted to their buyback value through February 25, 2016, the earliest buyback date, so that the carrying amount will equal the mandatory redemption at such date.
The Company incurred issuance costs amounting to Rs. 154,607 (US$2,336) which have been netted against the proceeds received from the issuance of the Mezzanine CCPS. The issuance costs are being accreted over the respective redemption periods on a straight line basis. The amount accreted totaled Rs. 789 and Rs. 107,627 (US$1,626) during the nine months ended December 31, 2014 and 2015, respectively. The unaccreted amount of issuance cost as of December 31, 2015 totaled Rs. 39,906 (US$603).
14. Earnings per share
The Company calculates earnings per share in accordance with FASB ASC Topic 260 Earnings per Share and FASB ASC Topic 260-10-45 Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities . Basic and diluted earnings losses per equity share give effect to the change in the number of equity shares of the Company. The calculation of basic earnings per equity share is determined by dividing net loss attributable to AZI equity shareholders by the weighted average number of equity shares outstanding during the respective periods. The potentially dilutive shares, consisting of employee share options, compulsorily convertible debentures, and compulsorily convertible preferred shares have been included in the computation of diluted net earnings per share and the weighted average shares outstanding, except where the result would be anti-dilutive.
The Mezzanine CCPS shareholders are entitled to participate, along with the equity shareholders, in the earnings of the Company. Under ASC Topic 260 Earnings per Share , such participative rights would require the two class method of reporting EPS. As the preferred shares do not participate in losses, the Company has excluded these shares, as including them would be antidilutive.
F-73
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Loss per share is presented below:
Nine months ended December 31 | ||||||||
2014
(Rs.) |
2015
(Rs.) |
|||||||
Net loss attributable to APGL equity shareholders |
(879,619 | ) | (1,052,767 | ) | ||||
Add: Accretion on Mezzanine CCPS |
(494,927 | ) | (1,076,087 | ) | ||||
Add: Accretion on Redeemable non-controlling interest |
| (18,837 | ) | |||||
|
|
|
|
|||||
Total (A) |
(1,374,546 | ) | (2,147,691 | ) | ||||
|
|
|
|
|||||
Shares outstanding for allocation of undistributed income: |
||||||||
Equity shares |
109,880 | 109,880 | ||||||
|
|
|
|
|||||
Weighted average shares outstanding |
||||||||
Equity shares (B) |
109,880 | 109,880 | ||||||
|
|
|
|
|||||
Net loss per share basic and diluted |
||||||||
Equity shares (C=A/B) |
(12,510 | ) | (19,546 | ) |
The number of share options outstanding but not included in the computation of diluted earnings per equity share because their effect was anti-dilutive is 25,961 and 25,930 for nine months ended December 31, 2014 and 2015, respectively.
The CCDs, Series E CCPS and Series G CCPS have not been considered for the computation of diluted earnings per share because these are considered to be anti-dilutive.
15. Leases
The Company leases office facilities and land use rights under operating lease agreements. Minimum lease payments under operating leases are recognized on a straight line basis over the term of the lease. Rent expense for operating leases for the nine months ended December 31, 2014 and 2015 was Rs. 17,391 and Rs. 43,558 (US$658), respectively.
Future minimum lease payments under non-cancellable operating leases as of December 31, 2015 are:
Nine months ended December 31, |
Amount
(Rs.) |
US$ | ||||||
2016 three months |
5,395 | 82 | ||||||
Fiscal 2017 |
21,983 | 332 | ||||||
Fiscal 2018 |
22,101 | 334 | ||||||
Fiscal 2019 |
21,521 | 325 | ||||||
Fiscal 2020 |
22,563 | 341 | ||||||
Thereafter |
1,079,265 | 16,306 | ||||||
|
|
|
|
|||||
Total |
1,172,828 | 17,720 | ||||||
|
|
|
|
F-74
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
16. Commitments, guarantees and contingencies
Capital commitments
During the normal course of business, the Company purchases assets for the construction of solar power plants and estimates it will incur Rs. 9,202,467 (US$139,031) during the twelve months ended December 31, 2016 in relation to such purchase commitments.
Guarantees
The Company issues irrevocable performance bank guarantees in relation to its obligation to construct solar power plants as required by the PPA. Such outstanding guarantees amounted to Rs. 1,083,300 and Rs. 1,355,000 (US$20,471) as of March 31, 2015 and December 31, 2015, respectively. The guarantees expire on the commissioning of the constructed solar power plant.
The Company has obtained guarantees from financial institutions as a part of the bidding process for establishing solar projects amounting to Rs. 259,000 and Rs. 842,700 (US$12,731) as of March 31, 2015 and December 31, 2015, respectively. The Company has given term deposits as collateral for those guarantees which are classified as restricted cash on the condensed consolidated balance sheet.
The terms of the PPAs provide for the annual delivery of a minimum amount of electricity at fixed prices.
17. Related Party Disclosures
For the nine months ended December 31, 2014 and 2015, the Company incurred rent expense on office facilities totaling Rs. 5,434 and Rs. 5,434 (US$82), respectively, where the lessors are relatives of the Companys chief executive officer and another director of AZI. As of March 31, 2015 and December 31, 2015, the Company had security deposits with these lessors totaling Rs. 6,300 (US$95) classified as a non-current asset on the condensed consolidated balance sheets because the rental agreements are long-term.
For the nine months ended December 31, 2014, the Company earned interest income of Rs. 1,454 on an unsecured loan given to the Companys chief executive officer which was repaid during the year ended March 31, 2015.
18. Share based compensation
On July 28, 2015, the Companys Board of Directors approved the 2015 Stock Option Plan (the 2015 Plan) allowing for a grant of up to 25,930 options.
Under the 2015 Plan, the Compensation Committee on behalf of Board of Directors (the Directors) may from time to time make grants to one or more employees, determined by it to be eligible for participation in the 2015 Plan.
The Compensation Committee determines which employees are eligible to receive the equity awards, the number of equity awards to be granted, the exercise price, the vesting period and the exercise period. The vesting period will be decided by the Compensation Committee as and when any grant takes place. All options granted under this plan shall vest over a period of 4 years from the date of grant with 25% vesting at the end of year one, 25% vesting at the end of year two, 25% vesting at the end of year three and 25% vesting at the end of year four.
F-75
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Options are deemed to have been issued under this plan only to the extent actually issued and delivered pursuant to a grant. To the extent that a grant lapses or the rights of its grantee terminate, any equity shares subject to such grant are again available for new grants.
The option grant is at such price as may be determined by the Compensation Committee and is specified in the option grant. The grant is in writing and specifies the number of options granted the price payable for exercising the options, the date/s on which some or all of the options shall be eligible for vesting, fulfillment of the performance and other conditions, if any, subject to which vesting shall take place and other terms and conditions thereto. The option grant is not be transferable and can be exercised only by the employees of the Company.
On July 28, 2015, the Company issued 25,930 options as replacement for 25,930 outstanding options by AZI under its option plan. In addition to the replacement of the options, the Company modified certain other terms of the options originally granted by AZI.
In accordance with ASC Topic 718, Compensation Stock Compensation, cancellation of options at AZI and reissue of options at APGL as well as the modification of certain other terms were considered as a plan modification. In respect of the option modifications, the Company computed the incremental fair value of the options. The incremental fair value of Rs. 45,719 (US$691) was determined as a difference between the fair value of the modified option and that of the original option, both estimated at the time of modification. The incremental fair value as per the vesting schedule as on the date of modification that are recorded amounted to Rs. 41,334 (US$624).
Share based compensation expense for the nine months ended December 31, 2014 and 2015 amounted to Rs 5,340 and Rs. 49,454 (US$747).
A summary of share option activity during the nine months ended December 31, 2015 is set out below:
Particulars |
Number of
Shares |
|||
Balance as of March 31, 2015 |
28,821 | |||
Granted |
863 | |||
Exercised (Prior to replacement and reorganization) |
(90 | ) | ||
Forfeitures |
(3,664 | ) | ||
|
|
|||
Options issued at APGL and outstanding as of December 31, 2015 |
25,930 | |||
|
|
F-76
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
The fair value of each share option granted to employees is estimated on the date of grant using the Black- Scholes option-pricing model with the following weighted average assumptions:
July 28, 2015 | ||||
Particulars |
Pre-modification | Post-modification | ||
Options granted |
29,684 | 25,930 | ||
Equity value (Rs.) |
7,642 | 8,943 | ||
Weighted average excise price (Rs.) |
3,307 | 3,418 | ||
Dividend yield |
0.00% | 0.00% | ||
Expected term (in years) |
0.2-2.8 | 5.0-6.8 | ||
Expected volatility |
37.2% - 41.6% | 37.2% - 41.6% | ||
Risk free interest rate |
7.60% - 8.08% | 7.60% - 8.08% |
19. Fair Value Measurements
FASB ASC Topic 820 Fair Value Measurements and Disclosures defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly, hypothetical transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier value hierarchy of fair value measurement based upon the whether the inputs to that measurement are observable or unobservable. Observable inputs reflect data obtained from independent sources while unobservable inputs reflect the Companys market assumptions. ASC Topic 820 prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:
Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 includes other inputs that are directly or indirectly observable in the marketplace. Observable inputs, other than Level 1 quoted prices for similar instruments in active markets; quoted prices for similar or identical instruments in markets that are not active; and valuations using models in which all significant inputs are observable in active markets.
Level 3 Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
In accordance with ASC Topic 820, assets and liabilities are to be measured based on the following valuation techniques:
Market approach Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Income approach converting the future amounts based on the market expectations to its present value using the discounting methodology.
Cost approach Replacement cost method.
F-77
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
The valuation techniques used by the Company to measure and report the fair value of certain financial assets and liabilities on a recurring basis are as follows;
Foreign exchange derivative contracts
The Company enters into foreign exchange derivative contracts to hedge fluctuations in foreign exchange rates for recognized balance sheet items such as foreign exchange term loans. The Company mitigates the credit risk of these foreign exchange derivative contracts by transacting with highly rated counterparties in India which are major banks. The Company used the super derivatives option pricing model based on the principles of the Black-Scholes model to determine the fair value of the foreign exchange derivative contracts. The inputs considered in this model include the theoretical value of a call option, the underlying spot exchange rate as of the balance sheet date, the contracted price of the respective option contract, the term of the option contract, the implied volatility of the underlying foreign exchange rates and the risk free interest rate as of the balance sheet date. The techniques and models incorporate various inputs including the credit worthiness of counterparties, foreign exchange spot and forward rates, interest rate yield curves, forward rate yield curves of the underlying. The Company classifies the fair value of these foreign exchange derivative contracts in Level 2 because the inputs used in the valuation model are observable in active markets over the term of the respective contracts.
F-78
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Compulsorily convertible debentures, Series E and G compulsorily convertible preferred shares
The Company classifies the fair value of the CCDs, Series E and Series G CCPS in level 3 because the fair values have been derived using valuation techniques in which one or more significant inputs are unobservable. The Company has used a discounted cash flow analysis under the income approach, to determine the fair value of the CCDs, Series E and Series G CCPs. This valuation model includes various inputs including issue price, liquidation amount, committed internal rate of return, discount rate and coupon rate.
Fair Value measurement at reporting date using | ||||||||||||||||
As of March 31,
2015 (Rs.) |
Quoted Prices in
Active Markets for Identical Assets (Level 1) (Rs.) |
Significant
Other Observable Inputs (Level 2) (Rs.) |
Significant
Unobservable Inputs (Level 3) (Rs.) |
|||||||||||||
Description | ||||||||||||||||
Assets |
||||||||||||||||
Current assets |
||||||||||||||||
Foreign exchange derivative contracts |
75,750 | | 75,750 | | ||||||||||||
Noncurrent assets |
||||||||||||||||
Foreign exchange derivative contracts |
158,338 | | 158,338 | | ||||||||||||
|
|
|
|
|||||||||||||
Total assets |
234,088 | | 234,088 | | ||||||||||||
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||
Current liability |
||||||||||||||||
Compulsorily convertible debentures |
987,681 | | | 987,681 | ||||||||||||
Noncurrent liabilities |
||||||||||||||||
Compulsorily convertible debentures and Series E compulsorily convertible preferred shares |
1,473,519 | | | 1,473,519 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
2,461,200 | | | 2,461,200 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Fair Value measurement at reporting date using | ||||||||||||||||
As of
December 31, 2015 (Rs.) |
Quoted Prices in
Active Markets for Identical Assets (Level 1) (Rs.) |
Significant
Other Observable Inputs (Level 2) (Rs.) |
Significant
Unobservable Inputs (Level 3) (Rs.) |
|||||||||||||
Description | ||||||||||||||||
Assets |
||||||||||||||||
Current assets |
||||||||||||||||
Foreign exchange derivative contracts |
102,204 | | 102,204 | | ||||||||||||
Noncurrent assets |
||||||||||||||||
Foreign exchange derivative contracts |
124,627 | | 124,627 | | ||||||||||||
|
|
|
|
|||||||||||||
Total assets |
226,831 | | 226,831 | | ||||||||||||
|
|
|
|
|||||||||||||
Liabilities |
||||||||||||||||
Current liability |
||||||||||||||||
Compulsorily convertible debentures |
1,978,853 | | | 1,978,853 | ||||||||||||
Series E and Series G compulsorily convertible preferred shares |
1,361,766 | | | 1,361,766 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
3,340,619 | | | 3,340,619 | ||||||||||||
|
|
|
|
|
|
|
|
F-79
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
Changes in compulsorily convertible debentures are as follows:
Rs. | US$ | |||||||
Balance as of March 31, 2014 |
1,428,800 | 21,586 | ||||||
Issuance of CCDs- IFC III |
180,000 | 2,719 | ||||||
Increase in fair value |
189,800 | 2,868 | ||||||
|
|
|
|
|||||
Balance as of March 31, 2015 |
1,798,600 | 27,173 | ||||||
Increase in fair value |
180,253 | 2,723 | ||||||
|
|
|
|
|||||
Balance as of December 31, 2015 |
1,978,853 | 29,896 | ||||||
|
|
|
|
Changes in Series E and Series G compulsorily convertible preferred shares are as follows:
Rs. | US$ | |||||||
Balance as of March 31, 2014 |
566,100 | 8,553 | ||||||
Increase in fair value |
96,500 | 1,458 | ||||||
|
|
|
|
|||||
Balance as of March 31, 2015 |
662,600 | 10,011 | ||||||
Increase in fair value |
157,220 | 2,375 | ||||||
Issuance of Series G CCPS |
541,946 | 8,188 | ||||||
|
|
|
|
|||||
Balance as of December 31, 2015 |
1,361,766 | 20,574 | ||||||
|
|
|
|
The carrying amount of cash and cash equivalents, including restricted cash, accounts receivable, accounts payables, and other current financial assets and liabilities approximate their fair value largely due to the short-term maturities of these instruments. There have been no transfers between categories during the current period.
The carrying value and fair value of the Companys fixed rate project financing term loans is as follows:
As of December 31, | ||||||||||||
2015 | ||||||||||||
Carrying
Value Rs. |
Fair
Value Rs |
US$ | ||||||||||
Fixed rate project financing loans: |
||||||||||||
Foreign currency loans |
6,146,876 | 6,500,618 | 98,211 |
As of March 31, | ||||||||||||
2015 | ||||||||||||
Carrying
Value Rs. |
Fair
Value Rs |
US$ | ||||||||||
Fixed rate project financing loans: |
||||||||||||
Foreign currency loans |
6,046,900 | 6,754,000 | 102,040 |
The Company uses the yield method to estimate the fair value of fixed rate loans using interest rate change as an input. The carrying amount of the Companys variable rate project financing term loans approximate their fair values due to variable interest rates.
F-80
AZURE POWER GLOBAL LIMITED
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Rs. and US$ amounts in thousands except share and per share data)
20. Derivative instruments and hedging activities
The following table presents outstanding notional amount and balance sheet location information related to foreign exchange derivative contracts as of March 31, 2015 and December 31, 2015:
March 31, 2015 | December 31, 2015 | |||||||||||||||||||||||
Notional
Amount |
Prepaid Expenses
and Other Current Asset |
Other
Assets |
Notional
Amount |
Prepaid Expenses
and Other Current Asset |
Other
Assets |
|||||||||||||||||||
Foreign currency option contracts (Rs.) |
| 75,750 | 158,338 | | 102,204 | 124,627 | ||||||||||||||||||
Foreign currency option contracts (US$) |
21,514 | | | 17,860 | | |
The foreign exchange derivative contracts mature generally over a period of 3 to 12 months.
Gains (losses) on foreign exchange derivative contracts for the nine months ended December 31, 2014 and 2015 aggregated Rs. 55,157 and Rs. 38,067 (US$575), respectively.
21. Concentrations of credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, restricted cash, accounts receivables and derivative instruments. The Company mitigates the risk of credit losses from financing instruments, other than trade receivables, by selecting counter parties that are well known Indian or international banks.
The following customers account for more than 10% of the Companys accounts receivable and sale of power as of and for the nine months ended December 31, 2014 and 2015:
December 31, 2014 | December 31, 2015 | |||||||||||||||
Customer Name |
% of Accounts
Receivable |
% of Sale
of Power |
% of Accounts
Receivable |
% of Sale
of Power |
||||||||||||
NTPC Vidyut Vyapar Nigam Limited |
39.66 | % | 62.92 | % | 8.34 | % | 26.68 | % | ||||||||
Punjab State Power Corporation Limited |
12.88 | % | 10.01 | % | 14.89 | % | 15.99 | % | ||||||||
Solar Energy Corporation of India |
| | 49.81 | % | 29.08 | % | ||||||||||
Gujarat Urja Vikas Nigam Limited |
37.62 | % | 22.88 | % | 8.18 | % | 9.79 | % | ||||||||
Chhattisgarh State Corporation |
| | 11.66 | % | 6.59 | % |
22. | Subsequent events |
During January 2016, the Company commenced commercial operations of its 28 MW solar power plant in the state of Punjab.
The Company has incurred additional borrowings under project level secured term loans amounting to Rs. 2,000,000 (US$30,216) during January 2016.
The Company evaluated all events or transactions that occurred after December 31, 2015. Based on this evaluation, the Company is not aware of any event or transactions that would require recognition or disclosure in the financial statements.
F-81
Affordable Solar Power for Generations
Our mission
is to be the lowest cost power producer in the world
Excellence Honesty socially Responsible Entrepreneurship
Azure Power
Equity Shares
Azure Power Global Limited
Prospectus
, 2016
Barclays
Until , 2016 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade in our equity shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as an underwriter and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. | Indemnification of Directors and Officers |
Under the Mauritius Companies Act, a company may indemnify a director or employee of the company or a related company for any costs incurred by him or the company in respect of any proceedings (a) that relates to liability for any act or omission in his capacity as a director or employee and (b) in which judgment is given in his favor, in which he is acquitted, which is discontinued, in which he is granted relief under section 350 of the Mauritius Companies Act or where proceedings are threatened and such threatened action is abandoned or not pursued. The Mauritius Companies Act further provides that a company may indemnify a director or employee of the company or a related company in respect of (a) liability to any person, other than the company or a related company, for any act or omission in his capacity as a director or employee or (b) costs incurred by that director or employee in defending or settling any claim or proceedings relating to any such liability, save in respect of any criminal liability or liability in respect of a breach (in the case of a director) of the duty to exercise his powers honestly in good faith in the best interests of the company.
SEC Position. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Pursuant to the underwriting agreement for this offering, the form of which is filed as Exhibit 1.1 to this registration statement, the underwriters will agree to indemnify our directors and officers and persons controlling us, within the meaning of the Securities Act, against certain liabilities that might arise out of or are based upon certain information furnished to us by any such underwriter.
Item 7. | Recent sales of unregistered securities |
During the past three years, we and AZI have issued and sold the securities listed below without registering the securities under the Securities Act. None of these transactions involved any underwriting discounts or commissions or any public offering. All our Series A, B, C, D, E, F, G and H preferred shares were offered or sold through private placements either (i) outside the United States to foreign persons, or (ii) inside the United States to accredited investors or to a limited number of persons in transactions not involving any public offering. All our options to purchase equity shares and the equity shares issued upon the exercise of such options were issued to directors or employees and were in respect of equity shares not exceeding 15.0% of our issued equity share capital. Accordingly, we believe that each of the following issuances were exempt from registration under the Securities Act in reliance on Regulation S, Section 4(a)(2) or Rule 701 of the Securities Act.
Date of Issuance |
Number of
Securities Originally Issued |
Title of Securities |
Aggregate
|
Purchaser |
||||||
November 11, 2011 |
10 | Equity shares |
0.01 |
One investor | ||||||
May 13, 2013 |
10 | Equity shares | 0.03 | One investor | ||||||
March 28, 2014 |
1,000 | Equity shares | 0.01 | One director | ||||||
September 30, 2011 |
229,880 | Compulsorily convertible preferred shares | 381.6 | Two investors | ||||||
September 11, 2012 |
79,909 | Compulsorily convertible preferred shares | 449.9 | Two investors |
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Date of Issuance |
Number of
Securities Originally Issued |
Title of Securities |
Aggregate
|
Purchaser |
||||||
December 12, 2012 |
4,439 | Compulsorily convertible preferred shares | 25.0 | One investor | ||||||
May 13, 2013 |
140,000 | Compulsorily convertible preferred shares | 491.4 | One investor | ||||||
July 17, 2014 |
79,245 | Compulsorily convertible preferred shares | 889.5 | Two investors | ||||||
December 24, 2014 |
38,581 | Compulsorily convertible preferred shares | 433.1 | Two investors | ||||||
February 6, 2015 |
20,307 | Compulsorily convertible preferred shares | 227.9 | One investor | ||||||
July 30, 2015* |
133,285 | Compulsorily convertible preferred shares | 3,815.4 | Two investors | ||||||
August 1, 2015 |
948,876 | Compulsorily convertible preferred shares | 3,520.3 | Azure Power Global Limited | ||||||
August 5, 2015* |
16,882 | Compulsorily convertible preferred shares | 540.5 | One investor | ||||||
August 10, 2015 |
146,644 | Compulsorily convertible preferred shares |
544.0 |
Azure Power Global Limited | ||||||
November 11, 2011 |
680,390 | Compulsorily convertible debentures | 680.4 | One investor | ||||||
January 4, 2013 |
37,500 | Compulsorily convertible debentures | 75.0 | One investor | ||||||
June 25, 2014 |
36,000 | Compulsorily convertible debentures | 180.0 | One investor | ||||||
From September 2011 to December 2015 | 25,930 | Options to acquire equity shares | Exercise price ranging from $0.16 to $175.31 per shares | Certain directors and employees of Azure Power Global Limited and AZI |
* | Sold by Azure Power Global Limited |
Item 8. | Exhibits and financial statement schedules |
(a) | Exhibits |
See exhibit index of this registration statement.
(b) | Financial statement schedules |
All schedules have been omitted because the information required to be presented in them is not applicable or is shown in the consolidated financial statements or related notes.
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Item 9. | Undertakings |
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
(ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
(iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
(iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in New Delhi, India on this 1st day of March, 2016.
Azure Power Global Limited | ||
By: |
/s/ Inderpreet Singh Wadhwa |
|
Name: | Inderpreet Singh Wadhwa | |
Title: | Principal Executive Officer |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Inderpreet Singh Wadhwa and Surendra Kumar Gupta, and each of them, his or her true and lawful attorneys in fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective on filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys in fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys in fact and agents or any of them, or his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons on behalf of the registrant and in the capacities held on March 1, 2016:
Signature |
Title |
|
/s/ Inderpreet Singh Wadhwa Inderpreet Singh Wadhwa |
Chief Executive Officer and Director (Principal Executive Officer) | |
/s/ Surendra Kumar Gupta Surendra Kumar Gupta |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
/s/ Eric Ng Yim On Eric Ng Yim On |
Director | |
/s/ Harkanwal Singh Wadhwa Harkanwal Singh Wadhwa |
Director | |
/s/ Muhammad Khalid Peyrye Muhammad Khalid Peyrye |
Director | |
/s/ Robert Kelly Robert Kelly |
Director | |
/s/ Sanjeev Aggarnal Sanjeev Aggarnal |
Director | |
/s/ William B. Elmore William B. Elmore |
Director | |
/s/ Barney S. Rush Barney S. Rush |
Director |
SIGNATURE OF AUTHORIZED REPRESENTATIVE OF THE REGISTRANT
Pursuant to the Securities Act, the undersigned, the duly authorized representative in the United States of Azure Power Global Limited, has signed this registration statement or amendment thereto in California, United States of America on March 1, 2016.
By: |
/s/ Robert Kelly |
|
Name: |
Robert Kelly |
|
Title: |
Director |
EXHIBIT INDEX
Exhibit
|
Description |
|
1.1* |
Form of Underwriting Agreement |
|
3.1 | Constitution of Azure Power Global Limited | |
3.2 |
Form of Amended and Restated Constitution of Azure Power Global Limited |
|
5.1 | Opinion of Appleby | |
8.1 | India tax opinion by Shardul Amarchand Mangaldas & Co | |
8.2 | Mauritius tax opinion by Appleby (included in Exhibit 5.1). | |
10.1 | Employee Stock Option Plan 2015 | |
10.2* | 2016 Equity Incentive Plan | |
10.3 | Shareholders Agreement dated July 22, 2015, by and among the shareholders named therein and the Registrant | |
10.4 | Shareholders Agreement, dated July 22, 2015, by and among the Registrant, AZI, Inderpreet Singh Wadhwa and Harkanwal Singh Wadhwa | |
10.5* | Form of Registration Rights Agreement by and among the shareholders named therein and the Registrant | |
10.6# | Employment Agreement, dated November 7, 2008, by and between AZI and Inderpreet Singh Wadhwa | |
10.7# | Employment Agreement, dated May 16, 2011, by and between AZI and Surendra Kumar Gupta | |
10.8# | Employment Agreement, dated May 1, 2013, by and between AZI and Sandeep Chopra | |
10.9# | Employment Agreement, dated November 1, 2009, by and between AZI and Preet Sandhu | |
10.10# | Employment Agreement, dated August 31, 2011, by and between AZI and Glen Minyard | |
10.11# | Employment Agreement, dated February 1, 2014, by and between AZI and Mohor Sen | |
10.12 | Indenture of Lease, dated October 15, 2013, by and between AZI and Sunbir Singh Wadhwa and Kulwinder Wadhwa | |
10.13* | Form of Indemnification Agreement, between the Registrant and each of the Officers and Directors of Azure Power Global | |
10.14 | Subscription Agreement, dated June 24, 2015, by and among AZI, Inderpreet Singh Wadhwa, Harkanwal Singh Wadhwa and IFC GIF Investment Company I | |
10.15 | Subscription Agreement, dated June 24, 2015, by and among AZI, Inderpreet Singh Wadhwa, Harkanwal Singh Wadhwa, IW Green Inc. (which has since been converted to IW Green LLC) and International Finance Corporation | |
10.16 | CCPS Subscription Agreement, dated July 22, 2015, among the Registrant, Sponsors and Société de Promotion et de Participation pour la Coopération Économique S.A. | |
10.17 | Letter Agreement, dated July 27, 2015, by and among the Registrant, International Finance Corporation, AZI, IW Green Inc. (which has since been converted to IW Green LLC), Inderpreet Singh Wadhwa and Harkanwal Singh Wadhwa | |
21.1 | List of Significant Subsidiaries of Azure Power Global Limited | |
23.1 | Consent of Ernst & Young Associates LLP | |
23.2 | Consent of Skadden, Arps, Slate, Meagher & Flom LLP | |
23.3 | Consent of Shardul Amarchand Mangaldas & Co (included in Exhibit 8.1) | |
23.4 | Consent of Appleby (included in Exhibit 5.1) | |
24.1 | Powers of Attorney (included in signature page to this Registration Statement) | |
99.1 |
Registrants Application for Waiver of Requirements of Form 20-F, Item 8.A.4 |
* | To be filed in a subsequent amendment |
# | Indicates management contract or compensatory plan. |
| Previously filed |
Exhibit 3.1
CONSTITUTION
OF
AZURE POWER GLOBAL LIMITED
CONTENTS
25. |
DIVIDENDS AND OTHER PAYMENTS | 93 | ||||
26. |
RESERVES | 94 | ||||
27. |
RECORD DATES | 94 | ||||
28. |
ACCOUNTING RECORDS | 95 | ||||
29. |
SERVICE OF NOTICES AND OTHER DOCUMENTS | 95 | ||||
30. |
AMALGAMATION | 95 | ||||
31. |
CONTINUATION | 96 | ||||
32. |
CONFLICTS WITH THE SHAREHOLDERS AGREEMENT | 96 | ||||
33. |
ALTERATION OF CONSTITUTION | 96 | ||||
34. |
INVESTORS CONSENT RIGHTS | 96 | ||||
SIGNATORIES |
100 |
CONSTITUTION OF AZURE POWER GLOBAL LIMITED
THIS CONSTITUTION is dated this 20 th day of July 2015.
INTERPRETATION
1. | INTERPRETATION |
1.1 | In this Constitution, unless the context otherwise requires: |
Accounts : the books of account of the Company and also includes its balance sheet, profit and loss account and all other records, ledgers, accounting notations and pertinent documentation;
Act : the Companies Act 2001 of Mauritius, as amended from time to time and any other Mauritius statute from time to time in force concerning companies insofar as the same applies to the Company;
Affiliate : in relation to a Person,
(i) | being a corporate entity, shall mean any entity or Person, which Controls, is Controlled by, or is under the common Control of such Person; |
(ii) | being an individual, shall mean any Relative or any other entity or Person, which is Controlled by such Person or a Relative of such individual; and |
(iii) | in any other case shall mean a Person Controlled by a Party/ies; |
Provided that , in relation to Helion and FC, Affiliate shall also include any general partner, officer or director of Helion and FC and any venture capital fund now or hereafter existing which is Controlled by or under common Control with one or more general partners or shares the same management company with Helion and FC;
Annual Business Plan and Budget : the annual business plan and budget, which business plan and budget shall set forth for each Financial Year: (a) a detailed review of the prior Financial Years operational and financial performance and a description of the proposed business activities of the Company and AZI for such Financial Year and the next Financial Year based on the performance in the previous Financial Year; (b) quarterly projections of all revenue and cost heads and financing for such Financial Year and quarterly projections for the next Financial Year for the Company and AZI; (c) the expected amounts and anticipated timing of periodic capital needs, if any of the Company and AZI; and (d) a statement of capital expenditures and a detailed break-down of working capital for the Company and AZI;
Annual Meeting : an annual meeting of the Shareholders of the Company convened in accordance with Article 12 below and the Act;
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Anti-Competitive Practice:
(i) | any common or implied action having as object and/or as effect to impede, restrict or distort fair competition in a market, in particular when it tends to: (1) restrict market access or the free exercise of competition by other companies; (2) prevent price fixing by the free play of markets by artificially favouring the increase or reduction of prices; (3) limit or control production, markets, investments or technical progress or, (4) share out markets or sources of supply; |
(ii) | any abuse by a company or a group of companies of a dominant position within an internal market or in a substantial part of it; |
(iii) | any bid or predatory pricing having as object and/or as effect to eliminate from a market or to prevent a company or one of its product from accessing a market; |
Applicable Investor Securities: as applicable, either the Series A CCPS or the Series B CCPS or the Series C CCPS or the Series D CCPS or the Series F CCPS or the Series H CCPS or the Proparco CCPS or the IFC CCDs or the IFC II CCDs or the IFC III CCDs or the DEG CCDs;
Applicable Liquidation Price: as applicable, either the Senior Liquidation Price or the Series H Liquidation Price or the Series F Liquidation Price or the CCPS Liquidation Price or the Series A Liquidation Price;
Article: provision of this Constitution;
Assets: assets or properties of every kind, nature, character and description (whether immovable, movable, tangible, intangible, absolute, accrued, fixed or otherwise) as operated, hired, rented, owned or leased by a Person from time to time, including cash, cash equivalents, receivables, securities, accounts and note receivables, real estate, plant and machinery, equipment, patents, copyrights, domain names, trademarks, brands, rights in databases and other intellectual property, raw materials, inventory, furniture, fixtures and insurance;
As If Converted Basis: the number of Equity Shares of the Company, calculated as if the then issued and outstanding relevant Share Equivalents had been exercised in full. Provided that each of the CCDs and Proparco CCPS will not be taken into consideration in the calculation of As If Converted Basis, till such time that they have not been transferred to a third party (not being an Affiliate of IFC, DEG or Proparco, as the case may be) in accordance with the terms of this Constitution. Provided however that for the limited purpose of ascertaining the rights available to DEG and IFC (with respect to their compulsorily convertible debentures) and Proparco (with respect to its Proparco CCPS) in relation to Article 11.8.2, the term on as As If Converted Basis shall include the DEG CCDs, IFC II CCDs, IFC III CCDs and Proparco CCPS and the voting percentages with respect to the Equity Securities on an As
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If Converted Basis in relation to Article 11.8.2 shall be as set out in Schedule Q of the Shareholders Agreement;
Audit Committee: the audit committee of the Company formed by the Board pursuant to Article 16.3 hereof, or any successor audit committee;
Authority: any national, supranational, regional or local government, or governmental, statutory, regulatory, administrative, fiscal, judicial, or government-owned body, department, commission (including but not limited to the SEC), authority, tribunal, agency or entity, or central bank (or any Person whether or not government owned and howsoever constituted or called, that exercises the functions of the central bank);
AZI: Azure Power India Private Limited, a company incorporated under the laws of India and having its registered office at 8, LSC, Madangir, Pushpavihar, New Delhi 110062, India;
AZI Shareholders Agreement: the amended and restated shareholders agreement entered on or around the date of the Shareholders Agreement between the Company, AZI, IW and HW, in relation to governance and other matters relating to AZI;
Big Four Accounting Firms: Deloitte Touche, PricewaterhouseCoopers, Ernst & Young, KPMG or their Affiliates;
Board: the Board of Directors of the Company or the Directors present at a meeting of Directors at which there is a quorum;
Buy Back Intimation: the meaning assigned to it under Article 9.1;
Buy Back Notice: the meaning assigned to it under Article 9.1;
Buy-Back Period: the meaning assigned to it under Article 9.1;
Buy Back Start Date: the meaning assigned to it under Article 9.1;
Business Day: a day (other than a Saturday or Sunday or an official public holiday) on which commercial banks are open for business in New Delhi, Mauritius and New York;
CCDs: collectively refer to IFC CCDs, IFC II CCDs, IFC III CCDs and DEG CCDs;
CCPS Liquidation Price: the meaning assigned to it Article 4.1(d);
CEO: the position of the chief executive officer and/or managing director of the Company or AZI, as the context may require;
Chairman: the meaning assigned to it in Article 11.7.8;
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Company: the company incorporated in Mauritius under the name of Azure Power Global Limited;
Compensation Committee: the compensation committee of the Company formed by the Board pursuant to Article 16.3 hereof, or any successor audit committee
Competitor: the Persons set out in Schedule N of the Shareholders Agreement, and shall include such other Persons as may be agreed to in writing by all the Parties;
Constitution: this constitution of the Company in its present form, or as amended from time to time in accordance with the provisions of the Act and this constitution;
Control (including with correlative meaning, the terms Controlled by and under common Control with ): the power to direct the management or policies of a Person, directly or indirectly, whether through the ownership of shares or Share Equivalents, by contract or otherwise; provided that, in any event, the direct or indirect ownership of more than 50% (fifty per cent) of the voting share capital of a Person is deemed to constitute Control of that Person;
Corrupt Practice: means the following acts:
(i) | the promise, offering or giving, directly or indirectly, to a Public Official or to any person who directs or works, in any capacity, for a private sector entity, of an undue advantage of any nature, for the relevant person himself or herself or for another person or entity, in order that this person acts or refrains from acting in the exercise of his or her official duties or in breach of his or her legal, contractual or professional obligations having for effect to influence his or her own actions or the ones of another party or entity; |
(ii) | the solicitation or acceptance, directly or indirectly, by a Public Official or by any person who directs or works, in any capacity, for a private sector entity, of an undue advantage of any nature, for the relevant person himself or herself or for another person or entity, in order that this person acts or refrains from acting in the exercise of his or her official duties or in breach of his or her legal, contractual or professional obligations having for effect to influence his or her own actions or the ones of another party or entity; |
Debt: at any time the aggregate of the following:
(i) | the outstanding principal amount or the nominal amount of any debenture, bond, note, loan stock or other similar security under which any indebtedness is incurred; and |
(ii) | any fixed or minimum premium payable on the repayment or redemption or conversion of any instrument; |
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Deed of Adherence: a deed of adherence to the Shareholders Agreement substantially in the form set forth in Schedule A to the Shareholders Agreement with applicable amendments which are in form and substance satisfactory to each of the Parties;
DEG: Deutsche Investitions und Entwicklungsgesellschaft mbH;
DEG CCDs: 680,390 (Six Hundred and Eighty Thousand, Three Hundred and Ninety) compulsorily convertible debentures as issued and allotted to DEG in accordance with the provisions of the DEG Subscription Agreement having an issue price of USD 19.89 (United States Dollars Nineteen and Eighty Nine Cents) each, and carrying interest at the rate of 5% (five per cent) per annum, and with such terms (including conversion) as set out in Schedule H of the Shareholders Agreement;
DEG CCD Liquidation Price: an amount equal to the DEG Investment Amount plus the DEG Required Return;
DEG Investment Amount: the investment of USD 13,534,712.55 (United States Dollars Thirteen Million, Five Hundred and Thirty Four Thousand, Seven Hundred and Twelve, and Fifty Five Cents) by DEG in the Company made by subscribing to the DEG CCDs in accordance with the terms of the DEG Subscription Agreement;
DEG Required Return: the meaning as set forth in paragraph 4.2 (i) (a) of Schedule H of the Shareholders Agreement;
DEG Securities: the DEG CCDs and the 10 (Ten) Equity Shares issued and allotted to DEG pursuant to the DEG Subscription Agreement;
DEG Subscription Agreement: the securities subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia , DEG and the Company for the subscription of the DEG Securities by DEG in the Company;
Director: such person or persons as shall be appointed to the Board from time to time pursuant to this Constitution;
Embargo: any economic sanction aiming at prohibiting the import and/or export (sale, supply, transfer) of one specific or several goods, products or services to or from a country for a specified period as published and amended from time to time by the United Nations, European Union and France;
Employees: the individuals who are the confirmed/ permanent employees of the Company or AZI, as the context may require;
Encumbrance: any mortgage, charge (fixed or floating), pledge, lien, hypothecation, trust, right of set off or other third party right or interest (legal or equitable) including any right of pre-emption, assignment by way of security, reservation of title or any other security interest
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of any kind however created or arising or any other agreement or arrangement (including a sale and repurchase arrangement) having similar effect;
Equity Securities: the Equity Shares and Share Equivalents;
Equity Shares or Shares: ordinary shares of the Company having a par value of USD 0.01(One Cent) each and carrying 1 (one) vote per share;
FATF Recommendations: the recommendations of the Financial Action Task Force (on money laundering);
FC: FC VI India Venture (Mauritius) Ltd.;
FC Securities: 19,385 (Nineteen Thousand, Three Hundred and Eighty Five) Series A CCPS, 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS, 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS, 53,273 (Fifty Three Thousand, Two Hundred and Seventy Three) Series D CCPS, 53,973 (Fifty Three Thousand, Nine Hundred and Seventy Three) Series F CCPS and 10 (Ten) Equity Shares subscribed by FC pursuant to the FC Subscription Agreement;
FC Subscription Agreement: the securities subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia , FC and the Company for the subscription of the FC Securities by FC in the Company;
Financial Year: the financial year of the Company as determined by the Board;
Fraud against the Financial Interests of the European Communities: any intentional action or omission intended to damage the European Union budget and involving (i) the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds or illegal diminution of resources of the general budget of the European Union, (ii) the non-disclosure of information, with the same effect and (iii) the misapplication of such funds for purposes other than those for which they were originally granted;
Fraudulent Practice: any unfair practices (action or omission) intended to deliberately mislead a third party, intentionally conceal elements there from, or betray or vitiate his/her consent, contravening legal or regulatory obligations and/or breaching the Companys or a third party internal rules for the purpose of obtaining an illegitimate benefit;
Fully Diluted Basis: the number of Equity Shares of the Company, calculated as if the then issued and outstanding relevant Share Equivalents (including CCDs and Proparco CCPS) had been exercised and converted in full. For the purpose of this definition, CCDs and Proparco CCPS shall be assumed to be converted in accordance with their respective terms, and in case their respective terms do not specify the manner of valuation of the Company for the provisions of the Shareholders Agreement for which the Fully Diluted Basis is being
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ascertained, then the Company shall on a written request of any of the holder of CCDs or Proparco CCPS cause the valuation of the Company to be conducted by any one of the Big Four Accounting Firms and inform the valuation to such holder, which valuation shall be used to determine the conversion of CCDs and/or Proparco CCPS;
GIF: IFC GIF Investment Company I;
GIF Subscription Agreement: the subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia , GIF and the Company for the subscription of Series H CCPS by GIF in the Company;
Helion: Helion India and Helion Partners collectively;
Helion India: Helion Venture Partners India II, LLC;
Helion Partners: Helion Venture Partners II, LLC;
Helion Securities: 19,385 (Nineteen Thousand, Three Hundred and Eighty Five) Series A CCPS, 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS, 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS, 26,636 (Twenty Six Thousand, Six Hundred and Thirty Six) Series D CCPS, 63,853 (Sixty Three Thousand, Eight Hundred and Fifty Three) Series F CCPS and 10 Equity Shares subscribed by Helion pursuant to the Helion Subscription Agreement;
Helion Subscription Agreement: the securities subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia , Helion and the Company for the subscription of the Helion Securities by Helion in the Company;
HW: Mr. Harkanwal Singh Wadhwa;
IFC: International Finance Corporation;
IFC CCDs: the 1,100,000 (One Million and Hundred Thousand) compulsorily convertible debentures as issued and allotted to IFC in accordance with the provisions of the IFC Subscription Agreement having an issue price of USD 4.95 (United States Dollars Four, and Ninety Five Cents) each and carrying interest at the rate of 10% (ten per cent) per annum, and with such terms (including conversion) as set out in Schedule E of the Shareholders Agreement;
IFC CCD Investment Amount: the investment of USD 5,441,717.91 (United States Dollars Five Million, Four Hundred and Forty One Thousand, Seven Hundred and Seventeen, and Ninety One Cents) by IFC in the Company made by subscribing to the IFC CCDs in accordance with the terms of the IFC Subscription Agreement;
IFC CCD Liquidation Price: the IFC CCD Investment Amount plus the IFC Required Return;
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IFC II CCDs: 37,500 (Thirty Seven Thousand and Five Hundred) compulsorily convertible debentures having the issue price of USD 36.85 (United States Dollars Thirty Six, and Eighty Five Cents) each, issued and allotted to IFC in accordance with the provisions of the IFC Subscription Agreement, and with such terms (including conversion) as set out in Schedule I of the Shareholders Agreement;
IFC II CCDs Investment Amount: the investment of USD 1,381,978.99 (United States Dollars One Million, Three Hundred and Eighty One Thousand, Nine Hundred and Seventy Eight, and Ninety Nine Cents) by IFC in the Company made by subscribing to the IFC II CCDs in accordance with the terms of the IFC Subscription Agreement;
IFC II CCD Liquidation Price: the IFC II CCDs Investment Amount plus the IFC II Required Return;
IFC III CCDs: 36,000 (Thirty Six Thousand) compulsorily convertible debentures having an issue price of USD 83.10 (United States Dollars Eighty Three, and Ten Cents) each, issued and allotted to IFC in accordance with the provisions of the IFC Subscription Agreement, and with such terms (including conversion) as set out in Schedule R of the Shareholders Agreement;
IFC III CCDs Investment Amount: the investment of USD 2,991,524.02 (United States Dollars Two Million, Nine Hundred and Ninety One Thousand, Five Hundred and Twenty Four, and Two Cents) by IFC in the Company made by subscribing to the IFC III CCDs in accordance with the terms of the IFC Subscription Agreement;
IFC III CCD Liquidation Price: the IFC III CCDs Investment Amount plus the IFC III Required Return;
IFC Required Return: the meaning as set forth in paragraph 4.2 (i) (a) of Schedule E of the Shareholders Agreement;
IFC II Required Return: the meaning as set forth in paragraph 4.2 (i) (a) of Schedule I of the Shareholders Agreement.
IFC III Required Return: the meaning as set forth in paragraph 4.2 (i) (a) of Schedule R of the Shareholders Agreement;
IFC Securities: the IFC CCDs, IFC II CCDs, IFC III CCDs, 73,272 (Seventy Three Thousand, Two Hundred and Seventy Two) Series B CCPS, 4,439 (Four Thousand, Four Hundred and Thirty Nine) Series D CCPS, 20,307 (Twenty Thousand, Three Hundred and Seven) Series F CCPS and 10 (Ten) Equity Shares subscribed by IFC pursuant to the IFC Subscription Agreement;
IFC Subscription Agreement: the securities subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia , IFC and the Company for the subscription to the IFC Securities by IFC in the Company;
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IFC Subscription Agreement-2: the subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia, IFC and the Company for the 22,214 (Twenty Two Thousand, Two Hundred and Fourteen) Series H CCPS by IFC in the Company;
Illicit Origin: funds obtained through: (i) the commission of any predicate offence as designated in the FATF 40 Recommendations Glossary (http://www.fatf-gafi.org/pages/glossary/fatfrecommendations/d-i/), (ii) Corrupt Practice, and (iii) if or when applicable, through Fraud against the Financial Interests of the European Communities.
INR: Indian National Rupees, official currency of the Republic of India;
Investors: Helion, FC, IFC, GIF, Proparco and DEG;
Investor Directors: the Directors nominated by the Nominating Investors;
Investor Subscription Agreement(s): any or all of the IFC Subscription Agreement, IFC Subscription Agreement-2, DEG Subscription Agreement, Proparco Subscription Agreement, Proparco Subscription Agreement-2, FC Subscription Agreement, Helion Subscription Agreement or GIF Subscription Agreement (as the context may require);
IPO: the initial public offering of the Equity Shares of the Company;
IPO Failure Date: December 31, 2015;
IP Rights: all rights in and in relation to any patent, patent application, know-how, trade mark, trade mark application, trade name, design, copyright domain name or other similar intellectual, industrial or commercial right, and all registrations, extensions and renewals thereof in any part of the world, arising or created for the Company and its Subsidiaries;
IRR: internal rate of return determined by using the XIRR function in Microsoft Excel, based on the exact dates of receiving cash flows and exact dates of investing the cash flows;
Issue Notice: the meaning assigned to it under Article 5.1.2;
IW: Mr. Inderpreet Singh Wadhwa;
IW Green Inc.: a company incorporated under the laws of the United States and having its principal office at 341, Raven Circile, Wyoming, Zip Code 19934, Kent, United States of America;
Key Managerial Personnel: with respect to the Company and/or AZI (as may be relevant), shall mean the CEO, all Employees directly reporting to the CEO, and such other persons as both the Sponsors and the Investors may agree to designate as such from time to time;
Key Subsidiary or Key Subsidiaries: at the relevant time:
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(i) | AZI; and |
(ii) | each Subsidiary or such Subsidiaries (both direct or indirect) of AZI where, as of the end of the then most recently completed fiscal year of AZI: |
(a) | the Assets of such Subsidiary or cumulative Assets of such Subsidiaries, as the case may be, account for more than 70% (seventy per cent) of the total consolidated Assets of AZI; or |
(b) | such Subsidiary or such Subsidiaries cumulatively, have earnings before interest, tax, depreciation and amortization representing more than 70% (seventy per cent) of AZIs total consolidated earnings before interest, tax, depreciation and amortization; |
Law: all applicable statutes, enactments, acts of legislature or parliament, laws, ordinances, rules, bye-laws, regulations, notifications, guidelines, policies, directions, directives and orders of any Authority, tribunal, board, court or recognized stock exchange in force in Mauritius or any other jurisdiction as may be applicable, and shall include (without limitation) the Act and any other act or regulation for the time being in force in Mauritius concerning public companies limited by shares registered in Mauritius and affecting the Company;
Liquidation Event A: any of the following, with respect to the Company or its Subsidiaries, as applicable:
(i) | compromise or arrangement with the creditors/debtors of the company or failure to pay Debts, under which the company may be wound up under applicable Law; |
(ii) | appointment of a provisional or official liquidator by an appropriate court under any applicable Law; or |
(iii) | commencement of any voluntary or involuntary liquidation, dissolution or winding up; |
Liquidation Event B: any of the following, with respect to the Company or its Subsidiaries, as applicable:
(i) | a merger, acquisition, consolidation, or other transaction or series of transactions in which the shareholders of the company following such transaction or transactions will not retain a majority of the voting power of the surviving entity; or |
(ii) | transfer of all or more than 70% (seventy per cent) in value of the companys Assets; |
Liquidation Preference: the right given to the holders of Equity Securities to receive a return on their investment as provided in Article 4.1 on the occurrence of Liquidation Event A or Liquidation Event B;
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Listing Date: meaning assigned to it under Article 8.1(b);
Mauritius: the Republic of Mauritius;
Meeting: a meeting of the Shareholders of the Company convened as either an Annual Meeting or Special Meeting of the Shareholders of the Company in accordance with Article 12 and the Act;
New Securities: the meaning assigned to it under Article 5.1.6;
Nominating Investors: mean a reference to GIF, Helion, FC, IFC and Proparco (if eligible under Article 11.2.2);
Notification Notice: the meaning assigned to it under Article 5.1.2;
Offering: any primary or secondary, public or private offering of Equity Securities of the Company;
OFAC: the United States Office of Foreign Assets Control;
Officer: a person appointed by the Board pursuant to this Constitution and shall not include an auditor of the Company;
OPIC: Overseas Private Investment Corporation;
Ordinary Resolution: a resolution of the Shareholders approved by a simple majority of the votes of those Shareholders entitled to vote and voting on the matter, passed in Meeting or, where required, of a separate class or separate classes or series of Shareholders passed in a separate Meeting;
Party or Parties: any of the Sponsors, Company and the Investors referred to individually or collectively, as the context so requires;
Permitted Transfers:
(i) | Transfer of 5,000 (five thousand) Equity Shares held by the Sponsors in the Company to the Permitted Transferees, provided that the Permitted Transferee executes a Deed of Adherence and agrees to be bound by the obligations applicable to the Sponsors Equity Shares under the Shareholders Agreement; or |
(ii) | Transfer of up to 3,127 (three thousand one hundred twenty seven) Equity Shares held by the Sponsors in the Company to Mr. Preet MS Sandhu in the following manner: |
(a) | The transfers shall take place over a period of 4 (four) years, which period shall commence from the date of execution of the Shareholders Agreement; |
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(b) | Not more than 782 (seven hundred eighty two) Equity Shares shall be transferred to Mr. Preet MS Sandhu in any 1 (one) year subject to accumulation as below; |
(c) | In a single calendar year, Mr. Preet MS Sandhu shall have the right to exercise his option to purchase the Equity Shares only once, but an un-exercised option may be carried over to the next year; |
(d) | At the end of the said 4 (four) years, all un-exercised options to purchase the Equity Shares shall lapse; |
Provided that, Mr. Preet MS Sandhu executes the Deed of Adherence and agrees to be bound by the obligations applicable to the Sponsors Equity Shares under the Shareholders Agreement;
Permitted Transferee: any and all of the following - Hannah Wadhwa, Veer Wadhwa, Harjinder K Wadhwa, Sunbir S Wadhwa, Kulwinder K Wadhwa and HW;
Person: includes an individual, an association, a corporation, a partnership, a joint venture, a venture capital fund, a trust, an unincorporated organization, a joint stock company or other entity or organization, including a government or political subdivision, or an agency or instrumentality thereof and/or any other legal entity;
Proparco: Société de Promotion et de Participation pour la Coopération Économique;
Proparco CCPS: (i) 140,000 (One Hundred and Forty Thousand) Series E CCPS having the issue price of USD 64.71 (United States Dollars Sixty Four and Seventy One Cents) each and such terms (including conversion) as set out in Schedule J of the Shareholders Agreement, issued and allotted to Proparco in accordance with the provisions of the Proparco Subscription Agreement; and (ii) 18,882 (Eighteen Thousand, Eight Hundred and Eighty Two) Series G CCPS having the issue price of USD 450.16 (United States Dollars Four Hundred and Fifty, and Sixteen Cents) each and such terms (including conversion) as set out in Schedule T of the Shareholders Agreement, issued and allotted to Proparco in accordance with the provisions of the Proparco Subscription Agreement-2;
Proparco CCPS Liquidation Price: an amount that is a sum of (i) the Proparco Investment Amount-1 plus the Proparco Required Return-1 with respect to Series E CCPS, and (ii) the Proparco Investment Amount-2 plus the Proparco Required Return-2, with respect to Series G CCPS;
Proparco Investment Amount-1: the investment up to USD 9,059,489.89 (United States Dollars Nine Million, Fifty Nine Thousand, Four Hundred and Eighty Nine, and Eighty Nine Cents) by Proparco in the Company made by subscribing to 140,000 (One Hundred and Forty Thousand) Series E CCPS and 10 Equity Shares in accordance with the terms of the Proparco Subscription Agreement;
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Proparco Investment Amount-2: the investment up to USD 8,499,921 (United States Dollars Eight Million, and Four Hundred Ninety Nine Thousand and Nine Hundred Twenty One) by Proparco in the Company made by subscribing to 18,882 (Eighteen Thousand, Eight Hundred and Eighty Two) Series G CCPS in accordance with the terms of the Proparco Subscription Agreement-2;
Proparco Required Return-1: the meaning as set for in paragraph 4.2(i)(a) of Schedule J of the Shareholders Agreement;
Proparco Required Return-2: the meaning as set out in paragraph 4.2(i)(a) of Schedule T of the Shareholders Agreement;
Proparco Securities: 140,000 (One Hundred and Forty Thousand) Series E CCPS and 10 (Ten) Equity Shares subscribed by Proparco pursuant to the Proparco Subscription Agreement;
Proparco Subscription Agreement: the securities subscription agreement, executed on or around the date of the Shareholders Agreement, between, inter alia , Proparco and the Company for the subscription of the Proparco Securities by Proparco in the Company;
Proparco Subscription Agreement-2: the subscription agreement entered into between, inter alia , Proparco and the Company for the subscription of 18,882 (Eighteen Thousand, Eight Hundred and Eighty Two) Series G CCPS by Proparco in the Company;
Public Official: (i) any holder of legislative, executive, administrative or judicial office appointed or elected, serving on a permanent basis or otherwise, paid or unpaid, regardless of rank; (ii) any other person exercising a public function, including for a public agency or company, or providing a public service; and (iii) any other person defined as a public official under the domestic law of the Companys country or Indian law;
QIPO: an IPO which is approved by the Investors, and which satisfies the following conditions:
(i) | The appointment of a merchant banker of international repute, acceptable to the Investors, in connection with the IPO; |
(ii) | The IPO results in the listing of the Companys Equity Shares on the Relevant Market; |
(iii) | The IPO is listed before the QIPO Due Date; |
(iv) | The gross proceeds from the offer of new or existing Equity Shares in the IPO is not less than USD 100,000,000 (United States Dollars One Hundred Million), which Equity Shares shall be freely tradable on the Relevant Market; and |
(v) |
The offering price per Equity Share in the IPO is based on the pre-money valuation of at least USD 450,000,000 (United States Dollars Four Hundred and Fifty Million) of the |
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Company; and |
(vi) | upon the consummation of the IPO, the Equity Shares held by the Investors (including on the conversion of the Equity Securities) shall be tradable on the Relevant Market, unless otherwise agreed by all the Investors; |
regardless of whether or not the Investor chooses to participate through an offer for sale of their Equity Shares in such IPO in the event the foregoing conditions are satisfied.
QIPO Due Date: the meaning as set forth in Article 7;
Register: the Register of Shareholders of the Company;
Registration Rights Agreement: each of the registration rights agreement(s) entered into by the shareholders of the Company setting out the right to have the registration statement filed with respect to the Equity Shares or Equity Securities held by them for resale/make an offering under the Securities Act of 1933, as amended;
Registered Office: the registered office for the time being of the Company;
Relative: with reference to any person, shall mean anyone who is related to another if:
(a) | they are members of a Hindu undivided family (as understood under the laws of India); |
(b) | they are husband or wife; |
(c) | such person is related to another by being the: |
(i) | Father (including step-father); |
(ii) | Mother (including step-mother); |
(iii) | Son (including step-son); |
(iv) | Sons wife; |
(v) | Daughter; |
(vi) | Daughters husband; |
(vii) | Brother (including step-brother); or |
(viii) | Sister (including step-sister); |
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Relevant Market: any of the New York Stock Exchange, the NASDAQ Global Market or any other stock exchange that is agreed to by the Investors;
Required Return: IFC Required Return, IFC II Required Return, IFC III Required Return, DEG Required Return, Proparco Required Return-1 or Proparco Required Return-2, as the context may require;
Seal: the common seal of the Company and includes any authorised duplicate thereof for use in Mauritius or in any place outside Mauritius;
SEC: the United States Securities and Exchange Commission;
Secretary: includes a temporary or assistant or deputy Secretary and any person appointed by the Board to perform any of the duties of the Secretary;
Senior Liquidation Price: IFC CCD Liquidation Price, IFC II CCD Liquidation Price, IFC III CCD Liquidation Price, DEG CCD Liquidation Price and Proparco CCPS Liquidation Price, as the context may require;
Series A CCPS: fully paid up compulsorily convertible preference shares having the rights, preferences and privileges as mentioned in Schedule C of the Shareholders Agreement;
Series A Investment Amount: the aggregate of (a) USD 939,336.42 (United States Dollars Nine Hundred and Thirty Nine Thousand, Three Hundred and Thirty Six, and Forty Two Cents) invested by Helion in the Company in consideration for the subscription of 19,385 (Nineteen Thousand Three Hundred and Eighty Five) Series A CCPS and (b) USD 948,834.43 (United States Dollars Nine Hundred and Forty Eight Thousand, Eight Hundred and Thirty Four, and Forty Three Cents) invested by FC in the Company in consideration for subscription of 19,385 (Nineteen Thousand Three Hundred and Eighty Five) Series A CCPS, in the manner set out in their respective Investor Subscription Agreement;
Series A Liquidation Price: the meaning assigned to it under Article 4.1;
Series B CCPS: fully paid up compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule D of the Shareholders Agreement;
Series B Investment Amount: the aggregate of (a) USD 4,486,444.56 (United States Dollars Four Million, Four Hundred and Eighty Six Thousand, and Four Hundred and Forty Four, and Fifty Six Cents) invested by IFC in the Company in consideration for the subscription of 73,272 (Seventy Three Thousand, Two Hundred and Seventy Two) Series B CCPS; and (b) USD 3,297,318.79 (United States Dollars Three Million, Two Hundred and Ninety Seven Thousand, and Three Hundred and Eighteen and Seventy Nine Cents) invested by Helion in the Company in consideration for the subscription of 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS and (c) USD 3,295,674.81 (United States Dollars Three
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Million, Two Hundred and Ninety Five Thousand, Six Hundred and Seventy Four and Eighty One Cents) by FC in the Company in consideration for the subscription of 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS, in accordance with their respective Investor Subscription Agreement;
Series B Liquidation Price: the meaning assigned to it under Article 4.1;
Series C CCPS: the fully paid up compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule F of the Shareholders Agreement;
Series C Investment Amount: the aggregate of (a) USD 3,921,899.28 (United States Dollars Three Million, Nine Hundred and Twenty One Thousand, Eight Hundred and Ninety Nine and Twenty Eight Cents) invested by Helion in the Company in consideration for the subscription of 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS; and (b) USD 3,900,891.40 (United States Dollars Three Million, Nine Hundred Thousand, Eight Hundred and Ninety One and Forty Cents) invested by FC in the Company in consideration for the subscription of 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS, in accordance with their respective Investor Subscription Agreement;
Series C Liquidation Price: the meaning assigned to it under Article 4.1.
Series D CCPS: fully paid up compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule G of the Shareholders Agreement;
Series D Liquidation Price: the meaning assigned to it under Article 4.1;
Series D Investment Amount: the aggregate of (a) USD 460,586.12 (United States Dollars Four Hundred and Sixty Thousand, Five Hundred and Eighty Six and Twelve Cents) invested by IFC in the Company in consideration for the subscription of 4,439 (Four Thousand Four Hundred and Thirty Nine) Series D CCPS; (b) USD 2,707,352.27 (United States Dollars Two Million, Seven Hundred and Seven Thousand, Three Hundred and Fifty Two and Twenty Seven Cents) invested by Helion in the Company in consideration for the subscription of 26,636 (Twenty Six Thousand, Six Hundred and Thirty Six) Series D CCPS; and (c) USD 5,415,783.77 (United States Dollars Five Million, Four Hundred and Fifteen Thousand, Seven Hundred and Eighty Three and Seventy Seven Cents) invested by FC in the Company in consideration for the subscription of 53,273 (Fifty Three Thousand, Two Hundred and Seventy Three) Series D CCPS, in accordance with their relevant Investor Subscription Agreement;
Series E CCPS: fully paid up compulsorily convertible preference shares of the Company having the issue price of USD 64.71 (United States Dollars Sixty Four and Seventy One Cents) each, issued and allotted to Proparco in accordance with the Proparco Subscription Agreement
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and having the rights, preferences and privileges as mentioned in Schedule J of the Shareholders Agreement;
Series F CCPS: fully paid compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule S of the Shareholders Agreement;
Series F Investment Amount: the aggregate of (a) USD 3,708,769.90 (United States Dollars Three Million, Seven Hundred and Eight Thousand, Seven Hundred and Sixty Nine and Ninety Cents) invested by IFC in the Company in consideration for the subscription of 20,307 (Twenty Thousand, Three Hundred and Seven) Series F CCPS; (b) USD 11,861,583.08 (United States Dollars Eleven Million, Eight Hundred and Sixty One, Five Hundred and Eighty Three and Eight Cents) invested by Helion in the Company in consideration for the subscription of 63,853 (Sixty Three Thousand, Eight Hundred and Fifty Three) Series F CCPS; and (c) USD 9,842,686.12 (United States Dollars Nine Million, Eight Hundred and Forty Two Thousand, Six Hundred and Eighty Six and Twelve Cents) invested by FC in the Company in consideration for the subscription of 53,973 (Fifty Three Thousand, Nine Hundred and Seventy Three) Series F CCPS, in accordance with their relevant Investor Subscription Agreement;
Series F Liquidation Price: the meaning set forth under Article 4.1 (c);
Series F Participation: the meaning set forth under Article 4.2 (d);
Series G CCPS: the fully paid compulsorily convertible preference shares of the Company having the issue price of USD 450.16 (United States Dollars Four Hundred and Fifty and Sixteen Cents) each, issued and allotted to Proparco pursuant to the Proparco Subscription Agreement-2 and with such rights, preferences and privileges as mentioned in Schedule T of the Shareholders Agreement;
Series H CCPS: fully paid compulsorily convertible preference shares of the Company having the issue price of USD 450.16 (United States Dollars Four Hundred and Fifty and Sixteen Cents) each and such rights, preferences and privileges as set forth in Schedule U of the Shareholders Agreement;
Series H CCPS Lock-in Agreement(s): both of the lock-in agreements dated on or around the date of the Shareholders Agreement entered into by GIF and IFC with certain other shareholders of the Company for setting out the lock-in obligation for the Equity Shares that will received by GIF and IFC on conversion of Series H CCPS held by them on the occurrence of QIPO;
Series H Investment Amount: the aggregate of (a) USD 49,999,721 (United States Dollars Forty Nine Million, Nine Hundred and Ninety Nine Thousand, Seven Hundred and Twenty One) invested by GIF in the Company in consideration for the subscription of 111,071 (One Hundred and Eleven Thousand and Seventy One) Series H CCPS in accordance with the GIF
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Subscription Agreement; and (b) USD 9,999,854 invested by IFC in the Company in consideration for the subscription of 22,214 (Twenty Two Thousand, Two Hundred and Fourteen) Series H CCPS in accordance with the IFC Subscription Agreement-2;
Series H Liquidation Price: the meaning set forth in Article 4.1 (b);
Shareholder: a Shareholder or member of the Company provided that for the purposes of the Act it shall also include any holder of notes, debentures or bonds issued by the Company;
Shareholders Agreement: the shareholders agreement dated on or about this Constitution entered into between the Company, Sponsors and the Investors, and includes all recitals, schedules, annexes and exhibits that may be annexed to it, and any amendments made to it by the Parties in writing;
Share Equivalents: the preference shares, bonds, debenture, loans, warrants, options or other similar instruments or securities which are convertible into or exercisable or exchangeable for, or which carry a right to subscribe for or purchase, Equity Shares of the Company or any instrument or certificate representing a beneficial ownership interest in the Equity Shares of the Company, including global depositary receipts or American depositary receipts and an instrument representing a Debt;
Special Meeting: a special meeting of the Shareholders of the Company convened in accordance with Article 12 below and the Act.
Special Resolution: a resolution approved by a majority of 75 per cent of the votes of those Shareholders entitled to vote and voting on the question;
Sponsors: IW, HW and IW Green Inc;
Sponsor Lock-in Agreement: the agreement between, inter alia , GIF, IFC, Helion, IW and IW Green Inc., with respect to the lock-in and distribution of proceeds from the sale of equity shares held by IW Green Inc. in the Company;
Subscription Notice: the meaning assigned to it under Article 5.1.2;
Subsidiary: any Person over 50% (fifty percent) of whose share capital is owned, directly or indirectly, by the Company, and shall include AZI and all Subsidiaries of AZI in terms of the Companies Act, 2013 as applicable in the Republic of India. The term Subsidiaries shall be construed accordingly;
d and Eighty Six Tho: any security interest, lease, license, option, voting arrangement, easement, covenant, notation, restriction, interest under any agreement, interest under any trust, or other right, equity, entitlement or other interest of any nature held by a third party;
Transaction Documents means:
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(i) | the Shareholders Agreement; |
(ii) | the IFC Subscription Agreement; |
(iii) | the IFC Subscription Agreement-2; |
(iv) | the Proparco Subscription Agreement; |
(v) | the Proparco Subscription Agreement-2; |
(vi) | the DEG Subscription Agreement; |
(vii) | the FC Subscription Agreement; |
(viii) | the Helion Subscription Agreement; |
(ix) | the GIF Subscription Agreement; |
(x) | the AZI Shareholders Agreement; |
(xi) | the Series H CCPS Lock-in Agreements; |
(xii) | the Sponsor Lock-in Agreement; |
(xiii) | the Registration Rights Agreement; and |
(xiv) | any other documents that may be entered into by the parties therein for the purpose of executing the transactions contemplated in the Transaction Documents; |
Transfer: to transfer, sell, convey, assign, pledge, hypothecate, create a security interest in or Encumbrance on, place in trust (voting or otherwise), transfer by operation of law or in any other way subject to any encumbrance or dispose of, whether or not voluntarily, and shall include reference to any action, which has the effect of creating any Third Party Interest in or over the Equity Securities. Transferable and Transferred shall have corresponding meanings;
Unpurchased Securities: the meaning assigned to it under Article 5.1.4; and
USD: United States Dollars, currency of United States of America.
1.2 | For the purposes of this Constitution, a corporation which is a Shareholder shall be deemed to be present in person at a Meeting if, in accordance with the Act, its authorised representative is present. |
1.3 | Words importing only the singular number include the plural number and vice versa. |
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1.4 | Words importing only the masculine gender include the feminine and neuter genders respectively. |
1.5 | Words importing persons include companies or associations or bodies of persons, whether corporate or un-incorporate. |
1.6 | A reference to writing shall include typewriting, printing, lithography, photography and electronic record. |
1.7 | Any words or expressions defined in the Act in force at the date when this Constitution or any part thereof are adopted shall bear the same meaning in this Constitution or such part (as the case may be). |
1.8 | Any term not defined herein shall have the same meaning given to that term under the Shareholders Agreement. |
The Company shall be a public Company limited by shares.
REGISTERED OFFICE
2. | REGISTERED OFFICE |
The Registered Office shall be at such place in Mauritius as the Board shall from time to time appoint.
STATED CAPITAL
3. | STATED CAPITAL |
3.1 | The Company shall maintain a stated capital. |
3.2 | The stated capital of the Company shall be expressed in USD or such other currency as the Directors may decide from time to time at their absolute discretion and shall consist of the total of all amounts received by the Company, or due and payable in respect of: |
3.2.1 | the issue of the shares; and |
3.2.2 | calls on the shares of the Company; |
including any share premiums paid to the Company in relation to those shares.
ALTERATION OF STATED CAPITAL
3.3 | Subject to the Law, the Company may, from time to time, by Ordinary Resolution: |
3.3.3 | divide its shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions; |
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3.3.4 | consolidate and divide all or any of its share capital into shares of larger par value than its existing shares; |
3.3.5 | engage in a forward stock split; and |
3.3.6 | change the currency denomination of its share capital. |
3.4 | Where any difficulty arises in regard to any division, consolidation, or sub-division under this Article, the Board may settle the same as it thinks expedient and, in particular, may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the Shareholders who would have been entitled to the fractions, and for this purpose the Board may authorise some person to transfer the shares representing fractions to the purchaser thereof, who shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale. |
3.5 | Subject to the Act and to any confirmation or consent required by Law or this Constitution, the Company may by Ordinary Resolution from time to time convert any preference shares (if any) into redeemable preference shares. |
REDUCTION OF STATED CAPITAL
3.6 | Subject to the Act, this Constitution and any confirmation or consent required by law or under this Constitution, the Company may from time to time by Special Resolution authorise the reduction of its stated capital (including any amount in any share premium account) as it thinks fit. |
3.7 | In relation to any such reduction, the Company may by Special Resolution determine the terms upon which such reduction is to be effected including, in the case of a reduction of part only of a class of shares, the designation of those shares to be affected. |
SHARES
3.8 | Subject to the Law, the provisions of this Constitution and the Shareholders Agreement and without prejudice to any special rights or restrictions for the time being attached to any Equity Securities or any class of Equity Securities, the Board may offer, issue, grant options over or otherwise dispose of Equity Securities of the Company to such persons, and in any number it thinks fit, with the prior approval of the Shareholders, at such times and for such consideration and upon such terms and conditions as the Board may determine. |
3.9 |
Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of Equity Securities, to make, or make available, any such allotment, offer, option or Equity Securities to Shareholders or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the |
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opinion of the Board, be unlawful or impracticable. Shareholders affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of shareholders for any purpose whatsoever. |
3.10 | Subject to the Constitution and the Shareholders Agreement, the Board may issue options, warrants or convertible securities or securities of similar nature conferring the right upon the holders thereof to subscribe for, purchase or receive any class of Shares or Equity Securities in the capital of the Company on such terms as it may from time to time determine. |
3.11 | Subject to the provisions of the Law, the Shareholders Agreement and this Constitution, the Board may, from time to time, create, constitute and issue class or classes or series of Equity Securities with such name or names as the Board may determine with the prior approval of the Shareholders. The creation, constitution and issue of a new class, classes or series of Equity Securities which do not rank pari passu with an existing class or classes or series of Equity Securities shall be subject to prior approval of the Shareholders of the Company by at least Special Resolution. |
3.12 | Subject to the provisions of this Constitution and the Shareholders Agreement, the Company may issue fractions of an Equity Security and a fractional Equity Security shall have the same corresponding fractional rights, qualifications, restrictions, and other attributes as those which relates to the whole share of the same class or series of Equity Securities. |
3.13 | Equity Securities in the Company shall be denominated in USD or such other currency as the Directors may decide from time to time at their absolute discretion and shall be issued at par or no par value and shall be registered in the share register to be kept by the Company. |
3.14 | Except as ordered by a court of competent jurisdiction or as required by Law, no person shall be recognised by the Company as holding any Equity Securities upon trust and the Company shall not be bound by or required in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any Equity Security or in any fractional part of a Equity Security or (except only as otherwise provided in this Constitution or by Law) any other right in respect of any Equity Security except an absolute right to the entirety thereof in the registered holder. |
3.15 | Subject to the Law and this Constitution, the Board may at any time after the allotment of Equity Securities but before any person has been entered in the Register as the holder, recognise a renunciation thereof by the allottee in favour of some other person and may accord to any allottee of an Equity Security, a right to effect such renunciation upon and subject to such terms and conditions as the Board considers fit to impose. |
SHARE RIGHTS
3.16 | Equity Securities of the Company shall be subject to all the provisions of this Constitution and the Shareholders Agreement with reference to lien, the payment of calls, forfeiture, transfer, transmission and otherwise. |
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3.17 | Subject to the provisions of the Law, any Equity Security in the Company may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or such restrictions, whether in regard to dividend, voting, return of capital or otherwise in accordance with this Constitution and the Shareholders Agreement. |
MODIFICATION OF RIGHTS
3.18 | Subject to the Act, Article 34 (where a higher percentage than 75% is required) and the Shareholders Agreement, all or any of the special rights for the time being attached to any class of Equity Securities for the time being issued may from time to time (whether or not the Company is being wound up) be altered or abrogated with the consent in writing of the holders of not less than 75% of the issued Equity Securities of that class or with the sanction of a Special Resolution passed at a separate Meeting of the holders of such Equity Securities voting in person or by proxy. |
3.19 | Subject to the Act, the special rights conferred upon the holders of any Equity Securities or class of Equity Securities shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such Equity Securities, be deemed to be altered by the creation or issue of further Equity Securities ranking pari passu therewith. |
CERTIFICATES
3.20 | The preparation, issue and delivery of certificates shall be governed by the Act. In the case of an Equity Security held jointly by several persons, delivery of a certificate to one of several joint holders shall be sufficient delivery to all. |
3.21 | If a share certificate is defaced, lost or destroyed, it may be replaced on such terms (if any) as to evidence and indemnity and to payment of the costs and out of pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board may think fit and, in case of defacement, on delivery of the old certificate to the Company. |
3.22 | All certificates for Shares or loan capital or other Equity Securities of the Company (other than letters of allotment, scrip certificates and other like documents) shall, except to the extent that the terms and conditions for the time being relating thereto otherwise provide, be issued under the Seal or signed by a Director, the Secretary or any person authorised by the Board for that purpose. The Board may by resolution determine, either generally or in any particular case, that any signatures on any such certificates need not be autographic but may be affixed to such certificates by some mechanical means or may be printed thereon or that such certificates need not be signed by any persons. |
LIEN
3.23 |
The Company shall have a first and paramount lien on every Equity Security (not being a fully paid Equity Security) for all monies, whether presently payable or not, called or payable, at a date fixed by or in accordance with the terms of issue of such Equity Security in respect of |
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such Equity Security, and the Company shall also have a first and paramount lien on every Equity Security (other than a fully paid Equity Security) standing registered in the name of a Shareholder, whether singly or jointly with any other person, for all the debts and liabilities of such Shareholder or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such Shareholder, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Shareholder or his estate and any other person, whether a Shareholder or not. The Companys lien on Equity Securities shall extend to all dividends payable thereon. The Board may at any time, either generally or in any particular case, waive any lien that has arisen or declare any Equity Security to be wholly or in part exempt from the provisions of this Article. |
3.24 | Subject to this Constitution, the Company may sell, in such manner as the Board may think fit, any Equity Security on which the Company has a lien but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen (14) days after a notice in writing, stating and demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment, has been served on the holder for the time being of the Equity Security. |
3.25 | The net proceeds of sale by the Company of any Equity Security on which it has a lien shall be applied in or towards payment or discharge of the debt or liability in respect of which the lien exists so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the person who was the holder of the Equity Security immediately before such sale. For giving effect to any such sale, the Board may authorise some person to transfer the Equity Securities sold to the purchaser thereof. The purchaser shall be registered as the holder of the Equity Securities and he shall not be bound to see to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the sale. |
CALLS ON SHARES
3.26 | Subject to the provisions of this Constitution, the Shareholders Agreement and to the terms of allotment, the Board may from time to time make calls upon the Shareholders (for the avoidance of doubt excluding the Company in respect of any nil or partly paid Equity Securities held by the Company as treasury shares) in respect of any monies unpaid on their Equity Securities (whether on account of the par value of the Equity Securities or by way of premium) and each Shareholder shall (subject to the Company serving upon him at least fourteen (14) days notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on their Equity Securities. A call may be revoked, extended or postponed as the Board may determine. |
3.27 | A call may be made payable by instalments and shall be deemed to have been made at the time when the resolution of the Board authorising the call was passed. |
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3.28 | A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the Equity Securities in respect of which the call was made. The joint holders of an Equity Security shall be jointly and severally liable to pay all calls in respect thereof. |
3.29 | If a sum called in respect of the Equity Securities is not paid before or on the day appointed for payment thereof the person from whom the sum is due shall pay interest on the sum from the day appointed for the payment thereof to the time of actual payment at such rate as the Board may determine, but the Board shall be at liberty to waive payment of such interest wholly or in part. |
3.30 | No Shareholder shall be entitled to receive any dividend or bonus or to be present and vote (save as proxy for another Shareholder) at any meeting of the Shareholders either personally or by proxy, or be reckoned in a quorum, or exercise any other privilege as a Shareholder until all calls or instalments due by him to the Company, whether alone or jointly with any other person, together with interest and expenses (if any) shall have been paid. |
3.31 | On the trial or hearing of any action or other proceedings for the recovery of any money due for any call, it shall be sufficient to prove that the name of the Shareholder sued is entered in the Register as the holder, or one of the holders, of the Equity Securities in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book, and that notice of such call was duly given to the Shareholder sued, in pursuance of this Constitution; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt. |
3.32 | Any sum which, by the terms of issue of an Equity Security, becomes payable on allotment or at any date fixed by or in accordance with such terms of issue, whether on account of the nominal amount of the Equity Security or by way of premium, shall for all the purposes of this Constitution be deemed to be a call duly made, notified and payable on the date on which, by the terms of issue, the same becomes payable and, in case of non-payment, all the relevant provisions of this Constitution as to payment of interest, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. |
3.33 | The Board may on the issue of Equity Securities differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment. |
3.34 |
The Board may, if it thinks fit, receive from any Shareholder willing to advance the same, and either in money or moneys worth, all or any part of the moneys uncalled and unpaid or instalments payable upon any shares held by him and upon all or any of the moneys so advanced (until the same would, but for such advance, become presently payable) pay interest at such rate (if any) as the Board may decide. The Board may at any time repay the amount so advanced upon giving to such Shareholder not less than one months notice of its intention in that behalf, unless before the expiration of such notice the amount so advanced |
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shall have been called up on the Equity Securities in respect of which it was advanced. Such payment in advance shall not entitle the holder of such Share or Equity Securities to participate in respect thereof in a dividend subsequently declared. |
FORFEITURE OF SHARES
3.35 | If a Shareholder fails to pay any call or instalment of a call on the day appointed for payment thereof, the Board may at any time thereafter during such time as any part of such call or instalment remains unpaid serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued. |
3.36 | The notice shall name a further day (not being less than fourteen (14) days from the date of the notice) on or before which, and the place where, the payment required by the notice is to be made and shall state that, in the event of non-payment on or before the day and at the place appointed, the Equity Securities in respect of which such call is made or instalment is payable will be liable to be forfeited. The Board may accept the surrender of any Equity Security liable to be forfeited hereunder and, in such case, references in this Constitution to forfeiture shall include surrender. |
3.37 | If the requirements of any such notice as aforesaid are not complied with, any Equity Security in respect of which such notice has been given may at any time thereafter, before payment of all calls or instalments and interest due in respect thereof has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited Equity Securities and not actually paid before the forfeiture. |
3.38 | When any Equity Security has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder of the Equity Security but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice as aforesaid. |
3.39 | A forfeited Equity Security shall be deemed to be the property of the Company and may be sold, re-offered or otherwise disposed of either to the person who was, before forfeiture, the holder thereof or entitled thereto or to any other person upon such terms and in such manner as the Board shall think fit, and at any time before a sale, re-allotment or disposition the forfeiture may be cancelled on such terms as the Board may think fit. |
3.40 | If any Equity Securities are forfeited and sold, any residue after the satisfaction of the unpaid calls and any accrued interests and expenses shall be paid to the person whose Equity Securities have been forfeited, or his executors, administrators or assignees or as he directs. |
3.41 |
A person whose Equity Securities have been forfeited shall thereupon cease to be a Shareholder in respect of the forfeited Equity Securities but shall, notwithstanding the forfeiture, remain liable to pay to the Company all monies which at the date of forfeiture were presently payable by him to the Company in respect of the Equity Securities with interest thereon at such rate as the Board may determine from the date of forfeiture until payment, and the Company may enforce payment without being under any obligation to make any |
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allowance for the value of the Equity Securities forfeited, at the date of forfeiture, but his liability shall cease if and when the Company shall have received payment in full of all such moneys in respect of the Equity Securities. For the purposes of this Article any sum which, by the terms of issue of an Equity Security, is payable thereon at a fixed time which is subsequent to the date of forfeiture, whether on account of the nominal value of the Equity Security or by way of premium, shall notwithstanding that time has not yet arrived be deemed to be payable at the date of forfeiture, and the same shall become due and payable immediately upon the forfeiture, but interest thereon shall only be payable in respect of any period between the said fixed time and the date of actual payment. |
3.42 | A declaration in writing that the deponent is a Director of the Company or the Secretary and that an Equity Security has been duly forfeited on the date stated in the declaration shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the Equity Security. The Company may receive the consideration (if any) given for the Equity Securities on the sale, re-allotment or disposition thereof and the Board may authorise some person to transfer the Equity Securities to the person to whom the same is sold, re-allotted or disposed of, and he shall thereupon be registered as the holder of the Equity Securities and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the Equity Securities be affected by any irregularity or invalidity in the proceedings relating to the forfeiture, sale, re-allotment or disposal of the Equity Securities. When any Equity Security shall have been forfeited, notice of the declaration shall be given to the Shareholder in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date thereof, shall forthwith be made in the register, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or make any such entry. |
3.43 | Notwithstanding any such forfeiture as aforesaid the Board may at any time, before any Equity Securities so forfeited shall have been sold, re-allotted or otherwise disposed of, permit the Equity Securities forfeited to be bought back upon the terms of payment of all calls and interest due upon and expenses incurred in respect of the Equity Securities, and upon such further terms (if any) as it thinks fit. |
3.44 | The forfeiture of an Equity Security shall not prejudice the right of the Company to any call already made or instalment payable thereon. |
3.45 | The provisions of this Constitution as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of an Equity Security, becomes payable at a fixed time, whether on account of the nominal value of the Equity Security or by way of premium, as if the same had been payable by virtue of a call duly made and notified. |
RIGHTS OF THE INVESTORS
4. | RIGHTS OF THE INVESTORS |
4.1 | Liquidation Event A |
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(a) | Subject to Article 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will be entitled to receive in preference to the holders of any other Equity Securities, proceeds representing an amount equal to the IFC CCD Liquidation Price, IFC II CCD Liquidation Price, IFC III CCD Liquidation Price, DEG CCD Liquidation Price and Proparco CCPS Liquidation Price, respectively, pro rata the amounts due to them in this Article 4.1(a). |
(b) | Subject to Article 4.1 (a) above and Article 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of Series H CCPS will be entitled receive in preference to the holders of the Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS), for each of the Series H CCPS held by them, an amount equal to: |
Series H Investment Amount plus an amount that provides a USD return of 8% (eight percent) IRR on the issue price paid by the holders of Series H CCPS to the Company for subscription of the Series H CCPS ( Series H Liquidation Price ), pro rata the amounts due to them under this Article 4.1 (b).
Notwithstanding anything to the contrary contained herein, the rights of the holders of the Series H CCPS shall be subordinate to the rights of the holders of the CCDs, Proparco CCPS in relation to the Liquidation Preferences of the Company.
(c) | Subject to Article 4.1 (a), Article 4.1 (b) above and Article 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of the Series F CCPS will be entitled to receive in preference to the holders of the Series B CCPS, Series C CCPS, Series D CCPS, Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS and Series H CCPS), for each of the Series F CCPS held by them, an amount equal to: |
1.5 x (one decimal five times) the price paid by the holders of Series F CCPS to the Company for subscription of the Series F CCPS plus any accrued but unpaid dividends (the Series F Liquidation Price ), pro rata the amounts due to them in this Article 4.1 (c).
Notwithstanding anything to the contrary contained herein, the rights of the holders of the Series F CCPS shall be subordinate to the rights of the holders of the CCDs, Proparco CCPS and Series H CCPS in relation to the Liquidation Preferences of the
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Company.
(d) | Subject to Article 4.1 (a), Article 4.1 (b), Article 4.1 (c) above and Article 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of the Series B CCPS, Series C CCPS and Series D CCPS will be entitled to receive in preference to the holders of Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS and Series F CCPS), for each of the Series B CCPS, Series C CCPS and Series D CCPS held by them, an amount equal to: |
2 x (two times) the price paid by each of IFC, Helion and FC to the Company for subscription of the respective Series B CCPS, Series C CCPS and Series D CCPS plus any accrued but unpaid dividends (the Series B Liquidation Price, Series C Liquidation Price and Series D Liquidation Price , as the case may be; and collectively, the CCPS Liquidation Price ), p ro rata the amounts due to them in this Article 4.1(d).
Notwithstanding anything to the contrary contained herein, the rights of the holders of the Series B CCPS, Series C CCPS and Series D CCPS shall be subordinate to the rights of the holders of the CCDs, Proparco CCPS, Series H CCPS and Series F CCPS in relation to the Liquidation Preferences of the Company.
(e) | After the payment to the holders of the CCDs and Proparco CCPS in accordance with Article 4.1 (a) above, the holders of Series H CCPS in accordance with Article 4.1 (b) above, the holders of the Series F CCPS in accordance with Article 4.1 (c) above and the holders of the Series B CCPS, Series C CCPS and Series D CCPS in accordance with Article 4.1(d) above, on occurrence of a Liquidation Event A in the Company and subject to Article 4.2 below, the holders of the Series A CCPS will be entitled to receive in preference to the holders of Equity Securities (other than the holders of the CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS) an amount equal to, for each Series A CCPS held by Helion and FC, 2 x (two times) the price paid by Helion and FC to the Company for subscription of the Series A CCPS plus any accrued but unpaid dividends ( Series A Liquidation Price ), pro rata the amounts due to them in this Article 4.1(e). |
4.2 | Other conditions |
(a) | Liquidation Preferences in Article 4.1 above will be subject to applicable Law, including, if applicable, the rights of workmen and secured creditors under applicable Law. |
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(b) | To the extent that proceeds available for distribution on a Liquidation Event A in the Company are inadequate to pay the Applicable Liquidation Price in full in accordance with Article 4.1 above, the total amount received and/or realised on such a Liquidation Event A, shall be used in same priority, first: to pay the Senior Liquidation Price to the holders of CCDs and Proparco CCPS ( pro rata the amounts due to them in Article 4.1 (a)), then second: to pay the Series H Liquidation Price to the holders of Series H CCPS ( pro rata the amounts due to them in Article 4.1(c)), then third: to pay the Series F Liquidation Price to the holders of the Series F CCPS (pro rata the amounts due to them in Article 4.1 (c)), then fourth: to pay the CCPS Liquidation Price to the holders of the Series B CCPS, Series C CCPS and Series D CCPS, respectively, ( pro rata the amounts due to them in Article 4.1(d)), and fifth: to pay the Series A Liquidation Price to the holders of Series A CCPS ( pro rata the amounts due to them in Article 4.1 (e)). For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by the Investors pursuant to the conversion of the Share Equivalents held by them shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Article 4.2(b) and such Equity Shares shall not be entitled to Liquidation Preference in Article 4.1; save and except where the Share Equivalents are converted into Equity Shares of the Company on or immediately prior to and only in connection with the Investors exercising their right upon the occurrence of a Liquidation Event A, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Share Equivalents will be entitled to priority in terms of payment in the like manner as the respective Share Equivalents which were converted into such Equity Shares, as set out in Article 4.1 and this Article 4.2(b). |
It is clarified that the Proparco CCPS shall have priority and preference over the Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS and Equity Shares issued by the Company, and the proceeds shall not be distributed to Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS and Equity Shares unless Proparco CCPS has received its applicable Senior Liquidation Price.
(c) | Subject to Articles 4.2 (d) and (e) below: |
(i) | to the extent there are additional proceeds available for distribution after payment of the Applicable Liquidation Price to the holders of CCDs, Proparco CCPS, and then Series H CCPS and then Series F CCPS and then the Series B CCPS, Series C CCPS and Series D CCPS and then Series A CCPS, the holders of |
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Equity Shares will share pro rata in the distribution of such remaining proceeds; and |
(ii) | Upon payment of the Applicable Liquidation Price as stated in Article 4.1 above, the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS shall not be entitled to participate or claim a share in such additional proceeds available for distribution. |
(d) | In case, (i) at least one of the Series A CCPS, Series B CCPS, Series C CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving respective Applicable Liquidation Price in the manner provided in Article 4.1(d) and Article 4.1(e) above, as applicable); and (ii) there are additional proceeds available for distribution after payment of the Applicable Liquidation Price to the holders of CCDs, Proparco CCPS, thereafter the Series H CCPS, thereafter the Series F CCPS, thereafter Series B CCPS, Series C CCPS and Series D CCPS and thereafter, Series A CCPS, then the holders of Series F CCPS and the holders of Equity Shares will share pro rata in the distribution of remaining proceeds. Notwithstanding the above, the holders of Series F CCPS shall not be entitled to more than half the price paid by each of their original holders to the Company for subscription of the Series F CCPS ( Series F Participation ) under this Article 4.2(d). For the purpose of clarification in relation to this paragraph, upon payment of the Applicable Liquidation Price as stated in Article 4.1, the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS shall not be entitled to participate or claim a share in such additional proceeds available for distribution. It is further clarified that in relation to this paragraph, the holders of Series F CCPS shall, in no event, be entitled to receive an amount in excess of the Series F Liquidation Price as stated in Article 4.1 plus the Series F Participation. |
(e) | Upon occurrence of a Liquidation Event A in the Company: |
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective Applicable Liquidation Price in the manner provided in Article 4.1(d) above) on or immediately prior to the occurrence of a Liquidation Event A, they shall have a right to participate pro rata to their shareholding on an As If Converted Basis in the proceeds available pursuant to the occurrence of Liquidation Event A; and |
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(ii) | if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective Applicable Liquidation Price in the manner provided in Article 4.1(c) above) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective Applicable Liquidation Price in the manner provided in Article 4.1(d) above) from the proceeds of the Liquidation Event A is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their respective Applicable Liquidation Price in the manner provided in Article 4.1(d) above) if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the Liquidation Differential Amount ), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the Liquidation Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to the Series F Participation. It is clarified that:
(i) | the failure of the Sponsors to ensure that the Liquidation Differential Amount is received by IFC (simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation) shall not affect the right of the holders of Series F CCPS to receive amounts pursuant to the Series F Participation; and |
(ii) | unless the Sponsors ensure that the Liquidation Differential Amount is received by IFC simultaneously with the amounts received by the holders of Series F CCPS pursuant to the Series F Participation, the Sponsors shall not receive any amounts from the proceeds upon occurrence of Liquidation Event A. |
(f) |
The Sponsors and the Company agree and undertake that they shall honour the Liquidation Preference of first, the holders of CCDs and Proparco CCPS, then second, the holders of the Series H CCPS, then third, the holders of the Series F CCPS, then fourth, the holders of the Series B CCPS, Series C CCPS and Series D CCPS and finally, the holders of Series A CCPS in distributing the proceeds of a Liquidation Event A in any manner legally permissible, including without limitation, re-distribution of proceeds that may be received by the Sponsors on a Liquidation Event A, to the |
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Investors. |
(g) | For the purposes of this Article 4 (Rights of the Investors), the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Article 4.2(g) shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
4.3 | Liquidation Event B in the Company |
The Shareholders agree that no Liquidation Event B can be completed by the Company unless such transaction has been approved in accordance with Article 11.8 of this Constitution. If on the occurrence of a Liquidation Event B in relation to the Company, every Investor issues a notice to the Company and the Sponsors, within 30 (thirty) days of any of them coming to be aware of such Liquidation Event B in respect of the Company, asking for the liquidation for the Company and its Subsidiaries, the Shareholders agree that the Company and its Subsidiaries shall be wound up and the proceeds so realised shall be distributed in order of the preference set out in Article 4.1 above and will be subject to the terms of Article 4.2 above. The Shareholders agree to take all such steps as may be required to ensure compliance of the terms of this Article 4.
4.4 | Liquidation Event A or Liquidation Event B of a Subsidiary (other than a Key Subsidiary) |
The Shareholders agree that no Liquidation Event B can be completed by a Subsidiary (other than a Key Subsidiary) unless such transaction has been approved in accordance with Article 11.8 of this Constitution.
Subject to applicable Law, including if applicable, the right of workmen and secured creditors under applicable Law and Article 4.5, on the occurrence of a Liquidation Event A or a Liquidation Event B in respect of a Subsidiary of the Company, the Shareholders agree that all proceeds received / available for distribution in respect of such Subsidiary (in case of Azure Power Punjab Private Limited, after payment of proceeds by Azure Power Punjab Private Limited to OPIC in repayment of any loan that may have been taken from OPIC by Azure Power Punjab Private Limited) shall be immediately paid to AZI, along with the other shareholders of such Subsidiary, and the amounts paid to AZI shall not be less than its pro
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rata share based on its shareholding percentage in such Subsidiary. The entire amount received by AZI from its Subsidiaries shall be immediately paid to the Company, which shall then by distributed to the Investors and the Sponsors in the order of preference set out in Article 4.1 and Article 4.2 above. For the purpose of this Article 4.4, a Subsidiary shall not include a Key Subsidiary.
4.5 | Liquidation Event A or Liquidation Event B of a Key Subsidiary |
In the event of a Liquidation Event A of a Key Subsidiary, the Shareholders agree that the Company and all the Subsidiaries of the Company will be wound up, and the proceeds of such winding up will be distributed amongst the Shareholders in the manner set out in Article 4.1 and will be subject to the terms of Articles 4.2.
The Shareholders further agree that if on the occurrence of the Liquidation Event B in relation to the Key Subsidiary every Investor issues a notice to the Company and the Sponsors within 30 (thirty) days of any of them coming to be aware of such Liquidation Event B in respect of any Key Subsidiary, asking for the liquidation for the Company and its Subsidiaries, the Company and its Subsidiaries shall be wound up and the proceeds so realised shall be distributed in order of the preference set out in Article 4.1 above and will be subject to the terms of Article 4.2. The Shareholders agree to take all such steps as may be required to ensure compliance of the terms of this Article 4.
5. | INVESTORS RIGHTS ON FURTHER ISSUE OF SHARES |
5.1 | Offering of New Securities |
5.1.1 | In case of any Offering of New Securities (as defined below), the Sponsors and the Investors shall have the right to purchase New Securities (as defined below) in proportion to their shareholding in the Company (calculated on an As If Converted Basis) in the manner set out in this Article 5.1. |
5.1.2 | If the Company proposes to issue New Securities, it shall give the Sponsors and the Investors a written notice of its intention, describing the New Securities, their price, and their general terms of issuance, and specifying each of the Sponsors and the Investors pro-rata share of such issuance (the Issue Notice ). The Sponsors and the Investors shall have 25 (twenty five) Business Days after any such notice is delivered (the Notification Date ) to give the Company a written notice that it agrees to purchase part or all of its pro-rata share of the New Securities for the price and on the terms specified in the Issue Notice (the Subscription Notice ). |
5.1.3 | The Company covenants that the price of any such Offering of New Securities shall not be less than the price paid for subscription of Series H CCPS. |
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5.1.4 | If any of the Sponsors or the Investors do not issue a Subscription Notice on or prior to the Notification Date or agree to acquire only part of their pro-rata share, then the Company shall by a written notice within 5 (five) Business Days of the expiry of the 25 (twenty five) Business Days period referred to in Article 5.1.2 above, notify the other Sponsors and the Investors of the number of New Securities not agreed to be purchased by the relevant Sponsor/s or the Investor/s ( Unpurchased Securities ) and provide them an option to subscribe to the Unpurchased Securities. The Investors, directly or through their Affiliates, and the Sponsors have an option to subscribe to all of the Unpurchased Securities in proportion to their respective shareholding calculated on a As If Converted Basis in accordance with Article 5.1.5 below, by intimating the Company in this regard within 5 (five) Business Days of receipt of the notice to subscribe to the Unpurchased Securities. In the event if any of the Investors directly or through their Affiliates and the Sponsors are not willing to buy its proportion of the Unpurchased Securities, then the Company will have the option to issue these Unpurchased Securities to any Person as the Board may deem fit. The terms and the price of the Unpurchased Securities being offered to any Person shall be the same as being offered to the Sponsors and Investors in the Issue Notice. |
5.1.5 | On the 35th (thirty-fifth) Business Day after the issue of the Issue Notice: |
(a) | the Investors (or their Affiliates, as applicable) and/ or the Sponsors shall subscribe for the number of its pro-rata Shares specified in the Subscription Notice and any Unpurchased Securities in accordance with Article 5.1.4 above; |
(b) | the Sponsors and/ or the Investors (or their Affiliates, as applicable) shall pay the relevant consideration to the Company; |
(c) | the Company shall enter in its share register or register of debenture holders (as applicable) the name of the Sponsors and/ or the Investors and the number of New Securities which have been issued to the Sponsors and/or the Investors; and |
(d) | the Company shall issue new certificates to the Sponsors and/ or the Investors representing the number of New Securities for which the Sponsors and/ or the Investors have subscribed. |
5.1.6 | New Securities shall mean any Shares of the Company or any Share Equivalents; provided, that the term New Securities does not include: |
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(a) | Equity Securities issued or issuable to officers, directors and Employees of, or consultants to, the Company pursuant to any benefit plan, including employee stock option plan that has been approved by the Board and issued in accordance with Article 5.2; |
(b) | Equity Securities issued or offered in a QIPO; |
(c) | Shares issuable upon the exercise or conversion of Equity Securities held by the Investors; |
(d) | Shares issued or issuable with prior written and unanimous consent of all the Sponsors and all the Investors where all the Sponsors and all the Investors have approved the terms and price of such issue; |
(e) | Shares issued or issuable in connection with any stock split or stock dividend or like transactions. |
5.1.7 | The Company shall not issue or allot any Equity Securities to any Person who (i) is named on (a) lists promulgated by the United Nations Security Council or its committees pursuant to resolutions issued under Chapter VII of the United Nations Charter; or (b) the World Bank Listing of Ineligible Firms (see www.worldbank.org/debarr); or (c) Financial Sanctions List, or (ii) does not comply with the FATF Recommendations against money laundering and the terrorism financing, or (iii) is named on the Specially Designated Nationals List administered by OFAC or is the target of any economic sanctions administered by OFAC. |
5.2 | EMPLOYEE STOCK OPTION PLAN (ESOP) |
5.2.1 | The option pool shall consist of not more than 35,543 Equity Shares of the Company on a Fully Diluted Basis. |
5.2.2 | Any stock options (created in accordance with sub Article 5.2.1 above) to Employees of the Company or AZI shall be issued in accordance with a stock option plan approved by the Board, under the terms of which the options granted shall vest each year over a 4 (four) year period. Any unvested or unexercised options shall be cancelled and credited back to option pool. The Employees of the Company or AZI may subscribe to the Equity Shares at par or at premium as per the terms and conditions of the applicable stock option plan. It is clarified that Employees of the Company or AZI to whom Equity Shares are issued under the ESOP would not be required to sign the Deed of Adherence. |
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5.2.3 | The Shareholders agree that any stock option plan that is approved by the Board will include an obligation on the Employees not to Transfer any of the Equity Securities held by them to any of the individuals or entities (i) named on (a) lists promulgated by the United Nations Security Council or its committees pursuant to resolutions issued under Chapter VII of the United Nations Charter; (b) the World Bank Listing of Ineligible Firms (see www.worldbank.org/debarr); (c) the Specially Designated Nationals List administered by OFAC; or (ii) who is the target of any economic sanctions administered by OFAC. Any future stock option plan for Employees/consultants, etc. will contain a similar provision in its terms of issue. |
5.2.4 | The Shareholders acknowledge that it is the intention of the Parties to grant stock options to IW for 6,100 (Six Thousand and One Hundred) Equity Shares ( ESOP Entitlement ) pursuant to the above, subject to the following conditions. In the event of occurrence of QIPO before December 31, 2015, the equity shares of AZI held by Azure Power Inc. and Mr. Satnam Sanghera shall be purchased by the Company and the ESOP Entitlement of IW will be reduced by such number of Equity Shares the value of which at the issue price per Equity Share in the QIPO is equal to the amount paid by the Company for the purchase of equity shares of AZI held by Azure Power Inc. and Mr. Satnam Sanghera. If the QIPO does not complete by December 31, 2015, the ESOP Entitlement of IW shall stand cancelled and IW shall not be issued any Equity Share for these stock options. |
6A | TRANSFER OF SHARES |
6A.1 | Subject to the Act and to such of the restrictions contained in this Constitution and the Shareholders Agreement as may be applicable, any Shareholder may transfer all or any of their Equity Securities by an instrument of transfer in the usual or common or in any other form which the Board may approve from time to time. |
6A.2 | The instrument of transfer of Equity Securities shall be signed by or on behalf of the transferor and the transferee provided that the Board may dispense with the execution of the instrument of transfer by the transferee in any case which it thinks fit in its discretion to do so. Without prejudice to the last preceding Article, the Board may also resolve, either generally or in any particular case, upon request by either the transferor or transferee, to accept mechanically executed transfers. The transferor shall be deemed to remain the holder of the Equity Securities until the name of the transferee is entered in the Register in respect thereof. Nothing in this Constitution shall preclude the Board from recognising a renunciation of the allotment or provisional allotment of any Equity Security by the allottee in favour of some other person. |
6A.3 | All instruments of transfer may be retained by the Company. |
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6A.4 | Subject to the provisions of the Act, the Company must on the written request of the transferor or transferee of a registered Equity Security in the Company enter in the Register the name of the transferee of the Equity Security. |
6A.5 | The registration of transfers may be suspended and the share register closed at such times and for such periods as the Company may from time to time by resolution of directors determine provided always that such registration shall not be suspended and the share register closed for more than thirty (30) days in any period of twelve (12) months. |
6A.6 | Until the name of the transferee is entered in the Register in accordance with the Act, the transferor shall be deemed to remain the holder of the Equity Securities and the Company shall, accordingly, not be required to treat a transferee of as a Shareholder of the Company. |
6A.7 | Subject to the provisions of the Act, the Board may, in its absolute discretion and by providing the reasons thereof, decline to register or delay the registration of any transfer of any Equity Security: |
6A.7.1 | with respect to any Equity Security which is not a fully-paid Equity Security; |
6A.7.2 | unless the instrument of transfer is duly registered (if required by Law) and lodged with the Company, accompanied by the certificate for the Equity Securities to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer; |
6A.7.3 | as otherwise required by Law; |
6A.7.4 | where registration would impose on the transferee a liability to the Company and the transferee has not signed the transfer; |
6A.7.5 | where a holder of any such Equity Securities has failed to pay on the due date any amount payable thereon either in terms of the issue thereof or in accordance with the provision of the Constitution (including any call made thereon); |
6A.7.6 | where the transferee is a minor or a person of unsound mind; |
6A.7.7 | where the transfer is not accompanied by such proof as the Board reasonably requires of the right of the transferor to make the transfer; |
6A.7.8 | where the Board acting in good faith decides in its sole discretion that registration of the transfer would not be in the best interests of the Company and/or any of its Shareholders. |
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6A.8 | If the Board declines to register a transfer it shall, within twenty eight (28) days after the date on which the instrument of transfer was lodged, send to the transferee notice of such refusal. |
6. | RESTRICTION ON TRANSFER |
6.1 | Restrictions on Transfer |
6.1.1 | Subject to compliance with this Article 6.1 ( Restrictions on Transfer ), Article 6.3 ( Transfer by the Investors ), Article 6.4 ( Drag Right of the Investors ) and Article 6.5 ( Drag Right of IFC, DEG and Proparco ), the Equity Securities (or part thereof) held by the Investors shall be freely transferable at all times and to any Person without the prior consent of any other Person, including the Company, other Investors and the Sponsors. The transferee of the Equity Securities shall comply with the know your customer requirements as required by applicable Law before the Company records the transfer of Equity Securities in its statutory registers. |
6.1.2 | The Shareholders of the Company shall not Transfer any of the Equity Securities held by them to any Person: (i) who is named on (a) lists promulgated by the United Nations Security Council or its committees pursuant to resolutions issued under Chapter VII of the United Nations Charter; or (b) the World Bank Listing of Ineligible Firms (see www.worldbank.org/debarr); or (c) Financial Sanctions List; [or (d) the Specially Designated Nationals List administered by OFAC, or (ii) who does not comply with the FATF Recommendations against money laundering and the terrorism financing, or (iii) who has been found by a judicial or administrative process or who or which is under any administrative, supervisory or criminal inquiry to have committed or engaged in any act given rise to Corrupt Practices, Fraudulent Practices, Anti-Competitive Practices, money laundering or terrorism financing, or (iv) who finances, buys or provides, materials or sectors subject to United Nations, European Union or French Embargo and/or is engaged in any sectors under United Nations, European Union or French Embargo or (v) whose equity, quasi equity and or shareholders loans accounts or associates current accounts are of Illicit Origin, or (vi) who is the target of any economic sanctions administered by OFAC. |
6.1.3 | Any Transfer of Equity Securities attempted in violation of this Article 6 (Transfer of Shares) shall be null and void, and shall not be binding upon the Company or the Board and the Company shall not, and each of the Shareholders shall exercise all rights and powers available to it to procure that the Company shall not, reflect on its books any Transfer of Equity Securities to any Person except a Transfer made in accordance with this Article 6. |
6.1.4 |
No Shareholder may Transfer more than 1% (one per cent) of the outstanding share capital of the Company on a Fully Diluted Basis to any single Person or to a group of |
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Persons who may be related to or are Affiliates of each other unless such Person becomes a party to the Shareholders Agreement by executing a Deed of Adherence. |
6.1.5 | The Company shall record in its share register and register of debenture holders (as applicable) that there are restrictions on the Transfer of the Equity Securities of the Company, and shall make a similar annotation on the certificate(s) for Equity Securities issued by the Company. |
6.1.6 | Each Selling Shareholder (as defined herein) which owns Equity Securities indirectly through one or more holding companies agrees that it will ensure that any disposal of any indirect interest in the Company is consummated as a Transfer of Equity Securities, and not by a sale of any shares or share equivalents of any such holding company, so as to ensure that the Parties will be able to exercise its rights under Article 6.3 (Transfer by the Investors). It is clarified that the restrictions under this Article 6.1.6 shall not apply in case of disposal of any indirect interest in the Company due to change in Control of either of Helion or FC. |
6.2 | Transfer by Sponsors |
6.2.1 | Except for Permitted Transfers or as provided for under Articles 6.3.4 (Transfer to Competitor), 6.4 (Drag Right of the Investors), 6.5 (Drag Right of IFC, DEG and Proparco), 6.6 (IFC, DEG and Proparco Call Option) and Article 7 (Qualified Initial Public Offering) of this Constitution, during the period commencing on the date of the Shareholders Agreement, and for as long as the Investors hold any Equity Securities in the Company, each of the Sponsors undertake that they shall not directly or indirectly Transfer any of their Equity Securities in any manner whatsoever to any Person (including to their Affiliates or other Sponsors) or create any Encumbrance with respect to any of their Equity Securities (other than a pledge of Equity Securities to help the Company or its Subsidiaries raise Debt if such Debt and its terms have been approved by the Board in accordance with Article 11.8 (Restrictions on Power of the Board and Shareholders). |
6.2.2 | Subject to Law, notwithstanding anything contained in Constitution, if the QIPO/IPO does not complete by the IPO Failure Date, then in the event of transfer of shareholding of the Sponsors in the Company and/or AZI or any IPO of the Company after the IPO Failure Date, the Sponsors shall implement the following: |
(a) |
in the event of transfer of Equity Securities held by the Sponsors pursuant to Article 6.3.4 ( Transfer to Competitor ), Article 6.4 ( Drag Right of the Investors ), Article 6.5 ( Drag Right of IFC, DEG and Proparco ), or otherwise on the transfer of all Equity Securities held by the Sponsors in the Company, or on the occurrence of QIPO or IPO (as relevant) pursuant to 7 ( Qualified Initial Public Offering ), or on the occurrence of Liquidation Event A or Liquidation |
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Event B, the Sponsors shareholding in AZI shall be bought back by the Company, AZI or any other Person in accordance with the AZI Shareholders Agreement, and any Excess Amount received by the Sponsors (or their Affiliates) from the transfer of their shareholding in AZI shall be distributed between the Sponsors, Helion, FC, GIF and IFC in the proportion set out in Schedule Z of the Shareholders Agreement; and |
(b) | in the event of transfer of the entire shareholding of AZI to any other Person, or on the occurrence of liquidation or winding-up of AZI, any Excess Amount received by the Sponsors (or their Affiliates) for their shareholding in AZI shall be distributed between the Sponsors, Helion, FC, GIF and IFC in the proportion set out in Schedule Z of the Shareholders Agreement. |
Helion, FC, GIF and IFC shall be paid their share of the Excess Amount by the Sponsors as determined above, either by payment of immediate available funds to Helion, FC, GIF and IFC of their share of the Excess Amount in a legally permissible method as may be agreed between the Sponsors, Helion, FC, GIF and IFC or, subject to the agreement between the Sponsors, Helion, FC, GIF and IFC, by way of transfer of Equity Securities held by the Sponsors in the Company to Helion, FC, GIF and IFC that corresponds in value to the amounts to be paid by the Sponsors to Helion, FC, GIF and IFC in accordance with the above. It is clarified that the above mentioned distribution by the Sponsors shall be a pre-condition to any transfer by the Sponsors of their Equity Securities in the Company (other than the Permitted Transfers or to Affiliates in accordance with this Constitution and the Shareholders Agreement) or of their share in AZI.
For the purpose of this Article 6.2.2, the Excess Amount shall mean any amount received by the Sponsors (or their Affiliates) against Transfer or buyback of their shares in AZI that is more than the face value of those shares, after adjusting for all taxes (including, but not limited to, capital gains tax/income tax as substantiated by actual tax returns filed with tax authorities, and if the actual tax returns cannot be filed, then by a certificate/opinion from a certified chartered accountant who is acceptable to Helion, FC, GIF and IFC) and expenses incurred by the Sponsors in relation to the sale of their shares in AZI.
This Article 6.2.2 shall cease to apply upon the Transfer by the Sponsors of their entire shareholding in AZI, subject to the fulfilment by the Sponsors of their obligations in this Article 6.2.2.
6.3 | Transfer by the Investors |
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6.3.1 | Subject to compliance with the provisions of Articles 6.1 ( Restrictions on Transfer ) and 6.3 ( Transfer by the Investors ), the Investors shall, at any time, be entitled to Transfer any Equity Securities held by them in the Company to any third party, provided that the restrictions set out in this Article 6.3 ( Transfer by the Investors ) shall not apply to the transfer of Equity Shares by any Shareholder as part of QIPO/IPO undertaken by the Company. |
6.3.2 | Right of First Offer |
The other Investors and the Sponsors (the Offering Shareholders ) shall have a right of first offer (the Right of First Offer ) with respect to any proposed Transfer of Equity Securities ( Transferable Securities ) by any Investor.
(a) | An Investor (the Selling Shareholder ) proposing to Transfer any Transferable Securities shall provide a written notice to the Offering Shareholders of its intention to sell all or part of the Transferable Securities ( Investor Sale Notice ). Such Investor Sale Notice shall also include a condition that all and not less than all of the Transferable Securities must be purchased by the Offering Shareholders. |
(b) | The Offering Shareholders, within 15 (fifteen) days of its receipt of the Investor Sale Notice, shall provide a written notice of their intention to purchase, all but not less than all Transferable Securities from the Selling Shareholder in terms of the Investor Sale Notice ( ROFO Exercise Notice ) along with the price, on a cash, non-contingent basis, they are willing to pay for the Transferable Securities subject to the Investor Sale Notice ( ROFO Price ). A ROFO Exercise Notice shall be irrevocable and shall constitute a binding offer by the Offering Shareholders to purchase the Transferable Securities under and in accordance with the ROFO Exercise Notice. Each Offering Shareholder shall also provide a copy of its ROFO Exercise Notice to the other Offering Shareholders. |
(c) | Upon the receipt of a ROFO Exercise Notice, and if the ROFO Price and other terms and conditions of the ROFO Exercise Notice are acceptable to the Selling Shareholder, the Selling Shareholder shall, by written notice, inform the Offering Shareholder, whose ROFO Price and other terms and conditions of the ROFO Exercise Notice are acceptable to the Selling Shareholder, within a period of 10 (ten) days from the date of receipt of the ROFO Exercise Notice, its intention to sell the Transferable Securities ( ROFO Acceptance Notice ) to such Offering Shareholder. Such Offering Shareholders shall, within 25 (twenty five) days from the date of the ROFO Acceptance Notice, consummate the Transfer of the Transferable Securities and pay the ROFO Price. |
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(d) | If there are two or more Offering Shareholders, having similar terms in the ROFO Exercise Notice, and whose ROFO Price and other terms and conditions of the ROFO Exercise Notice is acceptable to the Selling Shareholder, then the Selling Shareholder shall issue a ROFO Acceptance Notice to each such Offering Shareholder to acquire a pro-rata portion of the Transferable Securities based on the proportion that each such Offering Shareholders shareholding in the Company bears to the aggregate shareholding in the Company of all the Offering Shareholders that served a ROFO Acceptance Notice on a Fully Diluted Basis. |
(e) | If the Offering Shareholders have not elected to exercise their Right of First Offer within the period set forth above or if the ROFO Price and other terms and conditions of the ROFO Acceptance Notice are not acceptable to the Selling Shareholder, then subject to Article 6.3.3 or Article 6.3.4 (as the case may be), the Selling Shareholder shall be entitled, within 180 (one hundred eighty) Business Days of the Investor Sale Notice, to sell the Transferable Securities stated in the Investor Sale Notice to any third Person, provided the terms offered for the sale of the Transferable Securities to such third Person are no less favourable than those offered by the Offering Shareholders. |
(f) | The Company and the Sponsors hereby undertake to provide all necessary assistance in obtaining and/or making all the required filings, certifications, consents and approvals for consummation of the transfer of the Transferable Securities by the Selling Shareholder to a third Person. |
6.3.3 | Co-Sale Rights |
(a) | In case of proposed Transfer of any Equity Securities held by the Selling Shareholder in the Company to a third Person in accordance with Article 6.3.2(e), each Investor ( Remaining Investor and if there are more than one Remaining Investor, the Remaining Investors ), shall also have the right, to participate in such Transfer in accordance with this Article 6.3.3 ( Co-Sale Right ). |
(b) |
The Selling Shareholder shall promptly, but in any case upon finalization of the terms of the sale of Transferable Securities, give notice (the Transfer Notice ) to the Remaining Investors. The Transfer Notice shall describe in reasonable detail the proposed Transfer, including but not limited to the number and type of Equity Securities to be transferred, the consideration to be paid by the third party in accordance with Article 6.3.2 (the Buyer ), other material terms and conditions proposed by the Buyer in respect of the Transfer, and the name and address of each proposed Buyer, accompanied, if available, by a draft share purchase agreement or other information reasonably requested by the Remaining Investors. The Remaining Investors |
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shall have the right to participate in the proposed Transfer (the Tagging Investors ) by giving notice to the Selling Shareholder (a Tag Notice ) within a period of 15 (fifteen) Business Days from receipt of the Transfer Notice (the Exercise Period ), of the number of Equity Securities it wishes to transfer (the Tagged Shares ), subject to Article 6.3.3(c). For the avoidance of doubt, the Tagging Investors shall not be obligated to pay any fees or deal expenses of the Selling Shareholder(s) or of any other Person in connection with the exercise of its rights under this Article 6.3.3. |
(c) | Subject to the next sentences of this Article 6.3.3(c) and Article 6.3.3(f), the maximum number of Tagged Shares (of each of the Tagging Investor) shall be the number (and if this is not a whole number, such number rounded to the nearest whole number) obtained by multiplying the number of the Shares and/or Share Equivalents of the Company on an As If Converted Basis to be transferred by the Selling Shareholder by a fraction: (i) the numerator of which shall be the number of Shares and/or Share Equivalents of the Company on an As If Converted Basis held by the Tagging Investor as of the date of the Tag Notice; and (ii) the denominator of which shall be the aggregate number of Shares and/or Share Equivalents of the Company on an As If Converted Basis held by all the Investors as of the date of the Tag Notice. |
If by virtue of exercise of the Co-sale Right by any of the Tagging Investor under this Article 6.3.3, the proposed Transfer results in:
(i) | the holding of the Tagging Investor falling below 5% (five per cent) of the share capital of the Company calculated on an As If Converted Basis; or |
(ii) | the holding of all the Investors falling below 10% (ten per cent) of the share capital of the Company calculated on an As If Converted Basis; |
then, the Tagging Investor will be entitled to Transfer all the Equity Securities held by it in the Company to the Buyer and the right of the Selling Shareholder to Transfer any of the Transferable Securities shall stand proportionally reduced.
(d) | Any Transfer by the Tagging Investors shall be made on substantially the same terms and conditions as described in the Transfer Notice. However, the Tagging Investors shall not be required to make any representation or warranty to the Buyer, other than as to good title to the Tagged Shares, absence of liens with respect to the Tagged Shares, customary representations and warranties concerning the Tagging Investors power and authority to undertake the proposed Transfer, and the validity and enforceability of the Tagging Investors obligations in connection with the proposed Transfer. |
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(e) | The Selling Shareholders shall have a period of 30 (thirty) Business Days from the expiration of the Exercise Period to Transfer to the Buyer the Transferable Securities originally proposed to be transferred (less the number of Tagged Shares, if any), upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. The Selling Shareholders shall give the Tagging Investor at least 10 (ten) Business Days notice of the proposed date of the Transfer and the Tagging Investor shall Transfer the Tagged Shares to the Buyer at the same time upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. If the Selling Shareholders do not complete the Transfer within such period, any proposed subsequent Transfer by them of some or all of the Equity Securities originally proposed to be transferred shall again be subject to the provisions of Article 6.3.2 and this Article 6.3.3. |
(f) | The Selling Shareholders shall not Transfer any of their Equity Securities to the Buyer unless, at the same time, the Buyer purchases all of the Tagged Shares from the Tagging Investors upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. |
(g) | Notwithstanding anything to the contrary contained herein, but subject to the last sentence of this Article 6.3.3(g), the holders of the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will not be required to provide the Co-Sale Right to the Remaining Investors while Transferring their respective IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS. The holders of IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will also not be entitled to exercise the Co-Sale Right on the sale of Equity Securities by the other Investors. Provided however that, the holders of the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will be required to provide the Co-Sale Right to the Remaining Investors and also be entitled to exercise the Co-Sale Right on the sale of Equity Securities by other Investors (other than the holders of IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS, which have not been converted into Equity Shares) with respect to any Equity Shares issued to them after conversion of their respective IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS in accordance with their terms. |
6.3.4 | Transfer to Competitor |
(a) |
Notwithstanding anything to the contrary contained herein, in case of any proposed Transfer, at any time prior to the QIPO Due Date, of any Equity Securities held by any or all the Investors (the Selling Shareholder) in the Company to a Competitor in accordance with Article 6.3.2(e)6.3.2(e), resulting in one or more Competitors cumulatively holding more than 50% (fifty per cent) of the entire share capital of the Company (calculated on an As If |
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Converted Basis), the Sponsors and each Investor (Remaining Investor and if there are more than one Remaining Investor, the Remaining Investors), shall also have the right, ( Co-Sale Right ) to participate in such Transfer in accordance with this Article 6.3.4 and the provisions of Article 6.3.3 shall not apply to such Transfer. |
(b) | The Selling Shareholder shall promptly, but in any case upon finalization of the terms of the sale of Transferable Securities, give notice (the Transfer Notice) to the Remaining Investors and the Sponsors. The Transfer Notice shall describe in reasonable detail the proposed Transfer, including but not limited to the number and type of Equity Securities to be transferred resulting in one or more Competitors cumulatively holding more than 50% (fifty per cent) of the entire share capital of the Company (calculated on an As If Converted Basis), the consideration to be paid by the Competitor in accordance with Article 6.3.2(e), other material terms and conditions proposed by the Competitor in respect of the Transfer, and the name and address of each proposed Competitor, accompanied, if available, by a draft share purchase agreement or other information reasonably requested by the Sponsors and the Remaining Investors. The Remaining Investors and the Sponsors (the Tagging Shareholders) shall have the right to participate in the proposed Transfer by giving notice to the Selling Shareholder (a Tag Notice) within a period of 15 (fifteen) Business Days from receipt of the Transfer Notice (the Exercise Period), of the number of Equity Securities it wishes to Transfer (the Tagged Shares), subject to Article 6.3.4(c). For the avoidance of doubt, the Tagging Shareholders shall not be obligated to pay any fees or deal expenses of the Selling Shareholder(s) or of any other Person in connection with the exercise of its rights under this Article 6.3.4. |
(c) | The Shareholders agree that each of the Remaining Investors and the Sponsors shall be entitled to exercise their right and participate in this Transfer up to the entire extent of their shareholding in the Company and include in the Tagged Shares all the Equity Securities held by them. |
(d) | If the Sponsors and/or any of the Remaining Investors exercise their right under this Article 6.3.4, the Competitor shall purchase the Tagged Shares from the Tagging Shareholders. Provided that, if the number of Equity Securities proposed to be acquired by the Competitor in accordance with Article 6.3.2(e) is not sufficient to acquire all the Tagged Shares, the parties shall not proceed to consummate the transaction. |
(e) |
Any Transfer by the Tagging Shareholders shall be made on substantially the same terms and conditions as described in the Transfer Notice. However, the Tagging Shareholders shall not be required to make any representation or warranties to the Competitor, other than as to good title to the Tagged Shares, |
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absence of liens with respect to the Tagged Shares, customary representations and warranties concerning the Tagging Shareholders power and authority to undertake the proposed Transfer, and the validity and enforceability of the Tagging Shareholders obligations in connection with the proposed Transfer. |
(f) | The Selling Shareholders shall have a period of 30 (thirty) Business Days from the expiration of the Exercise Period to Transfer to the Competitor the Transferable Securities, upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. The Selling Shareholders shall give the Tagging Shareholder at least 10 (ten) Business Days notice of the proposed date of the Transfer and the Tagging Shareholder shall Transfer the Tagged Shares to the Buyer at the same time upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. If the Selling Shareholders do not complete the Transfer within such period, any proposed subsequent Transfer by them of some or all of the Equity Securities originally proposed to be transferred shall again be subject to the provisions of Article 6.3.2, Article 6.3.3 and Article 6.3.4. |
6.4 | Drag Right of the Investors |
6.4.1 | Upon the occurrence of the events mentioned in Article 6.4.2 and subject to all the Investors (other than DEG and Proparco in relation to Article 6.4.2(e); however, if they agree to exercise the Drag Along Right in relation to Article 6.4.2(e), then including DEG and Proparco) (the Dragging Investors) agreeing to exercise their Drag Along Right, all the Dragging Investors shall cumulatively and in conjunction have the right (Drag Along Right) to require the Sponsors in writing to sell immediately all the Equity Securities held by the Sponsors along with all the Equity Securities held by all Dragging Investors (the Dragged Securities) to any third Person (the Dragged Purchaser). The Sponsors upon receipt of a written notice from the Investors shall be bound to immediately Transfer all the Equity Securities held by the Sponsors to the Dragged Purchaser. For the avoidance of doubt, it is hereby clarified that the provisions of Article 6.3.4 shall not apply to the sale of Equity Securities to a Competitor under this Article 6.4, and the transfer restrictions under Article 6.3 shall not apply to the sale of Equity Securities under this Article 6.4. |
6.4.2 | The provisions of Article 6.4.1 shall apply in any of the following circumstances: |
(d) | If the Company has failed or is unable (for any reason) to effect a buy back in accordance with Article 9; |
(e) | If the Company has failed or is unable to effect a QIPO in accordance with Article 7; |
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(f) | If the Sponsors are in material breach of the terms of the Transaction Documents, which remains uncured upon the expiry of 15 (fifteen) days, in the collective opinion of the Investors; |
(g) | If the Company or the Sponsors are in material breach of any representation or warranties made by them in the Transaction Documents, which remain uncured upon the expiry of 15 (fifteen) days, in the collective opinion of the Investors; and |
(h) | If there is a breach of the terms the Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS, and such default is not cured, to the joint satisfaction of GIF, IFC, Helion and FC, within a period of 30 (thirty) days. |
6.4.3 | The Shareholders agree that proceeds from the sale of the Equity Securities of the Company will be distributed in the manner such that: |
(i) | the holders of the CCDs and Proparco CCPS will be entitled to receive in preference to the holders of any other Equity Securities, proceeds representing an amount equal to their respective Senior Liquidation Price, pro rata the amounts due to them in this Article 6.4.3(i); |
(ii) | subject to Article 6.4.3 (i) above and Article 6.4.4 below, the holders of the Series H CCPS will be entitled to receive in preference to the holders of the Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS and Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS), for each of the Series H CCPS held by them, an amount equal to the Series H Liquidation Price. |
(iii) | Subject to Article 6.4.3 (i), Article 6.4.3 (ii) above and Article 6.4.4 below, the holders of the Series F CCPS will be entitled to receive in preference to the holders of the Series B CCPS, Series C CCPS and Series D CCPS and Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS and Series H CCPS), for each of the Series F CCPS held by them, an amount equal to: |
the 1.5 x (one decimal five times) the price paid by the holders of Series F CCPS to the Company for subscription of the Series F CCPS plus any accrued but unpaid dividends, pro rata the amounts due to them in this Article 6.4.3 (iii).
(iv) | Subject to Article 6.4.3 (i), Article 6.4.3 (ii), Article 6.4.3 (iii) above and Article 6.4.4 below, the holders of the Series B CCPS, Series C CCPS and Series D CCPS will be entitled to receive in preference to the holders of Series A CCPS |
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and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS and Series F CCPS), for each of the Series B CCPS, Series C CCPS and Series D CCPS held by them, an amount equal to: |
2 x (two times) the price paid by each of IFC, Helion and FC to the Company for subscription of the respective Series B CCPS, Series C CCPS and Series D CCPS plus any accrued but unpaid dividends, pro rata the amounts due to them in this Article 6.4.3(iv).
(v) | After the payment to the holders of the CCDs and Proparco CCPS, in accordance with Article 6.4.3(i) above, holders of the Series H CCPS in accordance with Article 6.4.3 (ii), holders of the Series F CCPS in accordance with Article 6.4.3 (iii) above and to the holders of the Series B CCPS, Series C CCPS and Series D CCPS in accordance with Article 6.4.3 (iv) above, the holders of the Series A CCPS will be entitled to, receive in preference to the holders of Equity Securities (other than the holders of the CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS) an amount equal to, for each Series A CCPS held by Helion and FC, 2 x (two times) the price paid by Helion and FC to the Company for subscription of the Series A CCPS plus any accrued but unpaid dividends, pro rata the amounts due to them in this Article 6.4.3(v). |
6.4.4 | To the extent that proceeds on sale of Equity Securities of the Company are inadequate to pay to the holders of the Equity Securities in accordance with the provisions of Article 6.4.3, the total amount received and/or realised shall be used in the same priority between first: to pay the holders of CCDs and Proparco CCPS (pro rata the amounts due to them in Article 6.4.3(i)), then second: to pay the holders of the Series H CCPS (pro rata the amounts due to them in Article 6.4.3(ii)), then third: to pay the holders of the Series F CCPS (pro rata the amounts due to them in Article 6.4.3(iii)), then fourth: to pay the holders of the Series B CCPS, Series C CCPS and Series D CCPS (pro rata the amounts due to them in Article 6.4.3(iv)) and finally to pay the holders of Series A CCPS (pro rata the amounts due to them in this Article 6.4.3(v)). |
6.4.5 | Subject to Article 6.4.6 and Article 6.4.7 below: |
(i) | to the extent there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS and then Series H CCPS and then Series F CCPS and then the Series B CCPS, Series C CCPS and Series D CCPS and then Series A CCPS in accordance with Article 6.4.3 above, the holders of Equity Shares will share pro rata in the distribution of such remaining proceeds; and |
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(ii) | upon receipt by the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS of their full entitlement in accordance with Article 6.4.3 above, they shall not be entitled to participate or claim a share in such additional proceeds available for distribution. |
6.4.6 | In case, (i) at least one of the Series A CCPS, Series B CCPS, Series C CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Article 6.4.3); and (ii) there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS in the manner provided in Article 6.4.3, then the holders of Series F CCPS and the holders of Equity Shares will share pro rata in the distribution of remaining proceeds. Notwithstanding the above, the holders of Series F CCPS shall be entitled to an amount not more than the Series F Participation under this Article 6.4.6. It is clarified that the holders of Series F CCPS shall, in no event, be entitled to receive an amount in excess of 150% (one hundred and fifty percent) of the Series F Investment Amount plus the Series F Participation. |
6.4.7 | Upon the exercise of the Drag Along Right by the Investors: |
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Article 6.4.3) on or immediately prior to the exercise of the Drag Along Right by the Investors, in order to participate pro rata to their shareholding on an As If Converted Basis in the proceeds available from the sale of Equity Securities to the Dragged Purchaser; and |
(ii) | if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective entitlement in the manner provided in Article 6.4.3) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective entitlement in the manner provided in Article 6.4.3) from the proceeds available from the sale of Equity Securities to the Dragged Purchaser is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their share in proceeds available from the sale of Equity Securities to the Dragged Purchaser), if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the Drag Differential Amount ), |
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then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the Drag Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation. |
6.4.8 | The Shareholders agree that they shall enter into necessary documents with the Dragged Purchaser, or undertake such actions in any manner legally permissible, including without limitation, re-distribution of proceeds that may be received by the Shareholders, in order to comply with the provisions of this Article 6.4. |
6.4.9 | For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by the Investors pursuant to the conversion of the Share Equivalents held by them shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Article 6.4 and such Equity Shares shall not be entitled to preference in Article 6.4.3; save and except where the Share Equivalents are converted into Equity Shares of the Company on or immediately prior to and only in connection with the Investors exercising their right under this Article 6.4, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Share Equivalents will be entitled to priority in terms of payment and sale in the like manner as the respective Share Equivalents which were converted into such Equity Shares, as set out in Article 6.4. |
6.4.10 | For the purposes of this Article 6.4, the calculation of entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Article 6.4.10 shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
6.5 | Drag Right of IFC, DEG and Proparco |
6.5.1 |
Upon the occurrence of the events mentioned in Article 6.5.2, IFC, DEG or Proparco (other than DEG and Proparco in relation to events set out in Article 6.5.2(a); and other than IFC and Proparco in relation to events set out in Article 6.5.2(e); and other than IFC and DEG in relation to events set out in Article 6.5.2(f)) (the Selling Investors), either independently or along with any other of them, may without any consent from the other Investors require the Sponsors by issuance of a written notice to them to sell immediately all the Equity Securities held by the Sponsors (the Sponsor Dragged Securities) to (i) the other remaining Investors in accordance with Article 6.3.2 or (ii) any third Person (the Drag Purchaser) along with the Equity |
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Securities of the Selling Investors. The Sponsors upon receipt of a written notice from the Selling Investors shall be bound to immediately Transfer the Sponsor Dragged Securities to the Drag Purchaser. |
In the event the Selling Investors exercise their rights under this Article 6.5.1 to Transfer the Sponsor Dragged Securities to a Drag Purchaser, each of the other remaining Investors shall have a right to participate in this Transfer and Transfer their Equity Securities up to the entire extent of their shareholding in the Company (Tag Along Right) and the Selling Investors shall be required to ensure that the Drag Purchaser acquires the Equity Securities from the other remaining Investors on substantially the same terms and conditions (subject to the succeeding paragraph and Article 6.5.3) on which it proposed to acquire the Sponsor Dragged Securities. For the avoidance of doubt, it is hereby clarified that the provisions of Article 6.3.4 shall not apply to a Transfer of Equity Securities to a Competitor pursuant to this Article 6.5, and the transfer restrictions under Article 6.3 shall not apply to the sale of Equity Securities under this Article 6.5.
Notwithstanding anything to the contrary contained in this Article 6.5.1, the Shareholders agree that if the number of Equity Securities proposed to be acquired by the Drag Purchaser is not sufficient to acquire all the Equity Securities from the Selling Investors, Sponsors and remaining Investors (to the extent they wish to exercise their Tag Along Right), the Shareholders agree that the Drag Purchaser shall purchase such number of the Equity Securities in the following order of priority:
(i) | firstly, it shall purchase the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS on a pro rata basis; |
(ii) | secondly, it shall purchase the Series H CCPS on a pro rata basis; |
(iii) | thirdly, it shall purchase the Series F CCPS on a pro rata basis; |
(iv) | fourthly, it shall purchase the Series B CCPS, Series C CCPS and Series D CCPS on a pro rata basis; |
(v) | fifthly, it shall purchase the Series A CCPS from Helion and FC on a pro rata basis; and |
(vi) | lastly, upon purchase of the IFC CCDs, IFC II CCDs, IFC III CCDs, the DEG CCDs, Proparco CCPS, the Series H CCPS, the Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS in accordance with the terms of this Article, it shall acquire the Equity Securities from the Sponsors and other Equity Securities issued by the Company that have not been mentioned above, on a pro rata basis. |
6.5.2 | The provisions of Article 6.5.1 shall apply in the following circumstances: |
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(a) | If there is a material breach of the IFC Policy Covenants as set out in Schedule K of the Shareholders Agreement; or |
(b) | If there is a breach of the terms of the CCDs or Proparco CCPS and such default is not cured, to the sole satisfaction of their holders, within a period of 30 (thirty) days; or |
(c) | If the Company defaults on payment of interest on CCDs or Proparco CCPS and such default is not cured, to the sole satisfaction of their respective holders, within a period of 10 (ten) days; or |
(d) | If upon conversion (where the conversion ratio for the CCDs and Proparco CCPS is as provided in Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement), the CCDs and Proparco CCPS do not give their holders (IFC, DEG and/ or Proparco) their respective Required Return, and if the IFC/DEG/ Proparco Buy Back Option (referred in Article 9A.1) or the Deficit Call Option (referred in Article 6.6) are not consummated for any reason whatsoever. For the purposes of the above conversion, the Shareholders shall rely on a valuation of the Company done in accordance with paragraph 4.2 (i)(c) under Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, respectively; or |
(e) | If the Company or any of its Subsidiaries engage in any of the activities as set out in Schedule O of the Shareholders Agreement; or |
(f) | If there is a breach of the Proparcos policy covenants as set out in Schedule P of the Shareholders Agreement. |
6.5.3 | Notwithstanding anything to the contrary contained in this Article 6.5.1, the Shareholders agree that the proceeds from the sale of the Equity Securities of the Company to the Drag Purchaser shall be distributed in the following manner: |
(i) | firstly, the holders of IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS shall be entitled to receive in preference to the holders of other Equity Securities amounts up to their Senior Liquidation Price; |
(ii) | secondly, the holders of the Series H CCPS, shall be entitled to receive in preference to the holders of the other Equity Securities (other than IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS), amounts up to the Series H Liquidation Price; |
(iii) |
thirdly, the holders of the Series F CCPS, shall be entitled to receive in preference to the holders of the other Equity Securities (other than IFC CCDs, |
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IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS and Series H CCPS), amounts up to the Series F Liquidation Price; |
(iv) | fourthly, the holders of Series B CCPS, Series C CCPS and Series D CCPS shall be entitled to receive in preference to the holders of Series A CCPS and other Equity Securities issued by the Company (other than IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS and Series F CCPS) amounts up to their Applicable Liquidation Price; and |
(v) | fifthly, the holders of Series A CCPS shall be entitled to receive in preference to the holders of Equity Securities issued by the Company (except IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS) amounts up to their Applicable Liquidation Price. For the purpose of clarification, upon payment of the Applicable Liquidation Price as stated in Article 4.1, the holders of the CCDs and Proparco CCPS shall not be entitled to any other amount from the balance proceeds available for distribution. |
6.5.4 | To the extent that proceeds on sale of Equity Securities of the Company are inadequate to comply with the provisions of Article 6.5.1 and Article 6.5.3, the total amount received and/or realised shall be used in same priority first: to pay the holders of CCDs and Proparco CCPS (pro rata to the amounts due to them), then second: to pay the holders of the Series H CCPS (pro rata to the amounts due to them), then third: to pay the holders of the Series F CCPS (pro rata to the amounts due to them), then fourth: to pay the holders of the Series B CCPS, Series C CCPS and Series D CCPS and finally to pay the holders of Series A CCPS. It is clarified that if any Equity Securities are not sold to the Drag Purchaser, then the holders of such Equity Securities shall not be entitled to distribution in accordance with this Article 6.5. |
6.5.5 | Subject to Article 6.5.6 and Article 6.5.7 below: |
(i) | to the extent there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS and then Series H CCPS and then Series F CCPS and then the Series B CCPS, Series C CCPS and Series D CCPS and then Series A CCPS in accordance with Article 6.5.3 above, the holders of Equity Shares will share pro rata in the distribution of such remaining proceeds; and |
(ii) | upon receipt by the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS of their full entitlement in accordance with Article 6.5.3 above, such holders shall not be entitled to participate or claim a share in such additional proceeds available for distribution. |
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6.5.6 | In case, (a) at least one of the Series A CCPS, Series B CCPS, Series C CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Article 6.5.3); and (b) there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS in the manner provided in Article 6.5.3, then the holders of Series F CCPS and the holders of Equity Shares will share pro rata in the distribution of remaining proceeds. Notwithstanding the above, the holders of Series F CCPS shall be entitled to an amount not more than the Series F Participation under this Article 6.5.6. It is clarified that the holders of Series F CCPS shall, in no event, be entitled to receive an amount in excess of 150% (one hundred and fifty percent) of the Series F Investment Amount plus the Series F Participation. |
6.5.7 | Upon the exercise of the drag right by IFC, DEG or Proparco, and the Tag Along Right by the remaining Investors, if applicable, pursuant to this Article 6.5: |
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Article 6.5.3) on or immediately prior to the exercise of the drag right by IFC, DEG or Proparco or the exercise of Tag Along Right by the other Investors, in order to participate pro rata to their shareholding on an As If Converted Basis in the proceeds available from the sale of Equity Securities to the Drag Purchaser; and |
(ii) | if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective entitlement in the manner provided in Article 6.5.3) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective entitlement in the manner provided in Article 6.5.3) from the proceeds available from the sale of Equity Securities to the Drag Purchaser is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their share of the proceeds available from the sale of Equity Securities to the Drag Purchaser), if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the IFC Differential Amount), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the IFC Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation.
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6.5.8 | The Shareholders agree that they shall enter into necessary documents with the Drag Purchaser in order to comply with the provisions of this Article 6.5. The Sponsors, Helion and FC agree that the exercise by IFC, DEG and/or Proparco of the Drag Right under this Article 6.5, is without prejudice to IFCs, DEGs or Proparcos right under Law to proceed against the Sponsors, Helion and FC for a breach of their obligation to honour the Deficit Call Option in terms of Article 6.6. |
6.5.9 | For the avoidance of doubt, it is hereby clarified that the Equity Shares of the Company held by the Investors pursuant to the conversion of the Share Equivalents held by them, shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Article 6.5 and such Equity Shares shall not be entitled to preference in Article 6.5.3; save and except where the Share Equivalents are converted into Equity Shares of the Company on or immediately prior to and only in connection with the Investors exercising their right under this Article 6.5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Share Equivalents will be entitled to priority in terms of payment and sale in the like manner as the respective Share Equivalents that were converted into such Equity Shares, as set out in this Article 6.5. |
6.5.10 | For the purposes of this Article 6.5, the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Article 6.5.10 shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms |
6.6 | IFC, DEG and Proparco Call Option |
6.6.1 |
If upon conversion (where the conversion ratio for the CCDs and Proparco CCPS is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, as applicable), the CCDs and Proparco CCPS do not give their holders (i.e. IFC, DEG and/or Proparco) their respective Required Return and if the Company has failed or is unable (for any reason) to effect a buy back in accordance with Article 9A.1 that provides the holders of the CCDs and Proparco CCPS (or Equity Shares obtained upon their conversion) their respective Required Return, then each of IFC, DEG and Proparco in its discretion shall have the option (Deficit Call Option; and IFC, DEG and/or Proparco, who are exercising such Deficit Call Option, shall be referred to as the Call Purchaser(s)), but not the obligation, to require any or all of the Sponsors, Helion and FC to sell to such Call Purchaser (or its nominee) on a pro rata basis such number of Equity Securities (Deficit Option Securities) held by the Sponsors, Helion and FC as are necessary to |
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meet the shortfall in the Required Return, at the lowest price permissible under Law (Deficit Call Option Price). |
For the purposes of the above, the Shareholders shall rely on a valuation of the Company done in accordance with paragraph 4.2(i) (b) under Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, as applicable. The Deficit Call Option shall be exercised by IFC, DEG and/or Proparco in accordance with the procedure set out in Article 6.6.2. It is clarified that IFC, DEG and/or Proparco, on being entitled to exercise the Deficit Call Option, chooses to exercise the same, it shall be bound to exercise it such that Helion and FC are not called upon to transfer any Equity Securities held by them that is greater than the number of Equity Securities pro rata to the Equity Securities held by the Sponsors determined on a Fully Diluted Basis and the Deficit Call Option Notice shall be issued accordingly.
6.6.2 | IFC, DEG and/or Proparco shall exercise the Deficit Call Option by providing the Sponsors, Helion and FC a written notice (Deficit Call Option Notice) of its intention to exercise the Deficit Call Option. The Deficit Call Option Notice shall set out the number of Deficit Option Securities to be sold by each Sponsor, Helion and FC, the sale price for each Deficit Option Security and the date (Call Settlement Date) on which the Sponsors, Helion and FC shall sell the Deficit Option Securities to the Call Purchasers. |
6.6.3 | The issuance of the Deficit Call Option Notice shall constitute a valid and binding agreement between the Call Purchaser, the Sponsors, Helion and FC for the purchase by the Call Purchaser of the Deficit Option Securities, as applicable, held by the Sponsors, Helion and FC as mentioned in the Deficit Call Option Notice. On the Call Settlement Date, the Sponsors, Helion and FC shall sell the Deficit Option Securities to the Call Purchaser by delivery of the certificates representing the Deficit Option Securities (free and clear from all Encumbrances), together with duly executed forms of transfer in respect of the Deficit Option Securities to the Call Purchaser; and the Call Purchaser shall purchase the Deficit Option Securities from the Sponsors, Helion and FC and pay therefore in full, the applicable Deficit Call Option Price. |
6.6.4 | The Company, the Sponsors, Helion and FC undertake to provide all necessary assistance in obtaining and/or making all the required filings, certifications, consents and approvals for consummation of the Deficit Call Option. Further, if required by the Call Purchaser, Helion and FC undertake that, prior to the sale of the Deficit Option Securities, they shall convert, into Equity Shares of the Company, such number of Equity Securities held by them as are necessary for transfer to the Call Purchasers of their pro rata share of the Deficit Option Securities. |
6.6.5 |
For the avoidance of doubt, upon the completion of the sale of the Deficit Option Securities, the Sponsors, Helion and FC shall relinquish, and shall no longer be entitled to any dividends, profits, retained earnings of the Company or similar rights that |
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attach to the Deficit Option Securities so transferred to the Call Purchaser pursuant to the Deficit Call Option. |
6.6.6 | For the purposes of this Article 6.6, the entitled returns of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. |
6.7 | Sponsors, Helion and FC Call Option |
6.7.1 | If upon conversion (where the conversion ratio for the CCDs and the Proparco CCPS is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, as applicable), the CCDs and Proparco CCPS give to their holders (i.e., IFC, DEG and/or Proparco) a return in excess of their respective Required Return, and if the Company does not effect a buy back in accordance with Article 9A.2, then after a period of 15 (fifteen) Business Days from the conversion of the CCDs and/or Proparco CCPS, as applicable, the Sponsors, Helion and FC, in their discretion shall have the option ( Call Option ), but not the obligation, to require IFC, DEG and/or Proparco, who have received a return in excess of its Required Return ( Call Option Seller(s) ), to sell to them (on a pro rata basis based on the shareholding of the Sponsors, FC and Helion in the Company on a Fully Diluted Basis at that time) such number of Equity Shares ( Option Shares ) as is required to reduce Call Option Sellers shareholding to such percentage as is adequate to give the Call Option Seller its respective Required Return. It is clarified that the right of Sponsors, Helion and FC to exercise the Call Option in accordance with this Article 6.7 is several and may be exercised at the individual discretion of each of Sponsor, Helion or FC. It is further clarified that determination of return received by the Call Option Sellers under this Article 6.7.1 shall be based on the Equity Shares received by them on conversion of the CCDs or Proparco CCPS, as the case may be, and the value at which such Equity Shares are issued on the conversion of such CCDs or Proparco CCPS. |
For the purposes of the above conversion, the Shareholders shall rely on a valuation of the Company done in accordance with paragraph 4.2(i)(b) of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, as applicable. The transfer of the Option Shares pursuant to the Call Option shall be at the lowest price permissible under Law ( Call Option Price ). The Call Option shall be exercised by the Sponsors, Helion and FC in accordance with the procedure set out in Article 6.7.2.
6.7.2 |
The Sponsors, Helion and FC shall exercise the Call Option by providing the Call Option Seller a written notice ( Call Option Notice ) of their intention to exercise the Call Option, within 15 (fifteen) Business Days from the expiry of the 15 Business Days period mentioned in Article 6.7.1. The Call Option Notice shall set out the number of Option Shares (on a pro rata basis) to be sold by the Call Option Seller to the Sponsor, |
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Helion and FC, the sale price for each Option Share and the date ( Settlement Date ) on which the Call Option Seller shall sell the Option Shares. |
6.7.3 | The issuance of the Call Option Notice shall constitute a valid and binding agreement between the Call Option Seller and the Sponsor, Helion and FC for the purchase by the Sponsor, Helion and FC of the Option Shares as mentioned in the Call Option Notice. On the Settlement Date, the Call Option Seller shall sell the Option Shares to the Sponsor, Helion and FC by delivery of the certificates representing the Option Shares (free and clear from all Encumbrances), together with duly executed forms of transfer in respect of the Option Shares to the Sponsor, Helion and FC and the Sponsor, Helion and FC shall purchase the Option Shares from the Call Option Seller and pay therefore in full, the applicable Call Option Price. |
6.7.4 | If a Sponsor or either of Helion and FC: (a) does not exercise its Call Option within the period set forth above; or (b) exercises its Call Option but does not consummate the purchase of the Option Shares on the Settlement Date, then the other Sponsors and either of Helion and FC shall be entitled to purchase (on a pro rata basis) on the terms and conditions set out in this Article 6.7, the balance Option Shares. |
6.7.5 | For the avoidance of doubt, upon the completion of the sale of the Option Shares, the Call Option Sellers shall relinquish, and shall no longer be entitled to any dividends, profits, retained earnings of the Company or similar rights that are attached to the Option Shares so transferred to the Sponsor, Helion and FC (as the case may be) pursuant to the Call Option. |
6.7.6 | For the purposes of this Article 6.7, the entitled returns of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. |
6.8 | For the avoidance of doubt, it is also clarified that nothing contained in Article 6.6 and Article 6.7: |
(a) | shall be construed as imposing any restrictions on the transferability of Equity Securities held by Helion and FC which shall continue to remain freely transferable in accordance with this Constitution; and |
(b) | shall be construed as otherwise affecting any of the terms of the Series A CCPS or Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and Series H CCPS as contained in Schedule C, Schedule D, Schedule F, Schedule G and Schedule S and Schedule U of the Shareholders Agreement, respectively except to the extent specified in the Shareholders Agreement. |
It is further clarified that the restrictions on transfer under Article 6.3 shall not apply on the transfer of Equity Shares pursuant to Article 6.6 and Article 6.7.
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6.9 | Notwithstanding anything to the contrary contained herein, the Shareholders agree that calculation of the Series F Liquidation Price, CCPS Liquidation Price or the Series A Liquidation Price will be done taking into account the Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS, respectively, held by Helion and FC prior to the exercise of the Deficit Call Option and the Call Option under Article 6.6 and Article 6.7. |
Subject to the Act and to such of the restrictions contained in this Constitution as may be applicable, any Shareholder may transfer all or any of his shares by an instrument of transfer in the usual or common, or in any other form which the Board may approve from time to time.
7. | QUALIFIED INITIAL PUBLIC OFFERING |
7.1 | The Company shall use its best endeavours, and the Sponsors undertake to cause the Company to make best endeavours to, conduct the QIPO, and to list the Equity Securities of the Company on a Relevant Market, on or prior to February 25, 2016 ( QIPO Due Date ), or such other date agreed to in writing by the Investors. |
7.2 | The Company shall not conduct an IPO other than any IPO approved by all Investors or the QIPO before the QIPO Due Date. Notwithstanding anything to the contrary contained in the foregoing provisions of this Article 7.1, the Investors shall jointly have the right to provide a notice to the Company requiring it to take necessary steps to undertake the QIPO or IPO of the Company, requiring the listing of the Equity Securities (as converted) held by the Investors, on the Relevant Market (the Demand Notice ) within a period of 180 (one hundred and eighty) days from the date of the Demand Notice. If the Demand Notice is with respect to an IPO, the provisions of Article 7.3 to Article 7.10 shall mutatis mutandis apply with respect to such IPO, and reference to the term QIPO shall be construed as reference to the term IPO. |
7.3 | If requested by one or more Investors, the QIPO undertaken by the Company under this Article 7 shall be through an offer for sale, or a combination of a new issue and an offer for sale, of Equity Securities. In such a scenario: (i) the Investors may offer their respective shareholdings in the Company, on a pro rata basis calculated on a Fully Diluted Basis, and (ii) the Equity Securities offered by the Investors shall be offered for sale in the QIPO prior to the offer for any new Equity Shares to be issued by the Company in the QIPO. If the Investors offer their Equity Securities in any offer for sale, the Sponsors and the Company hereby confirm and undertake to do the following: |
(a) | Ensure that the total offer of Equity Securities to the public shall constitute not less than such percentage (as prescribed under the prevalent rules and Laws) of the total post issue paid-up share capital to comply with the listing requirements of the Relevant Market; |
(b) |
Provide all material information and ensure compliance with all applicable provisions under the guidelines, the listing agreement of the Relevant Market and other |
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regulations existent at the time of the QIPO and subsequent listing of the Equity Securities of the Company for trading on a Relevant Market; |
(c) | The Relevant Market(s) on which the Equity Securities offered by the Investors shall be listed, the timing, pricing, appointment of the lead manager, the underwriter and the appointment of an investment bank of international repute as book runner for the offering shall be mutually agreed amongst the Investors, the Sponsors and the Company; and |
(d) | In the event of an offer for sale in which the Investors offer their Equity Securities, and subject to the Investors providing the Company with requisite authority, the Company agrees to indemnify and hold harmless the Investors for including their Equity Securities in such secondary offering, from and against losses caused by any untrue statement of a material fact contained in any statement or prospectus relating to such secondary offering, or caused by any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses are caused by any such untrue statement or omission based upon information furnished in writing to the Company by or on behalf of the relevant Investor (seeking indemnity) expressly for use therein. |
7.4 | In the event that the Company undertakes the QIPO under this Article 7, the Sponsors undertake to provide such number of Equity Securities as may be required in addition to the Equity Securities held by the Investors to fulfil the mandatory minimum offer size requirement for achieving the QIPO and listing under applicable Laws. The Company shall obtain all consents and approvals from the Authority as may be necessary to complete the QIPO if the QIPO is to be undertaken under this Article 7. |
7.5 | If the Investors decide to offer up to 100% (one hundred per cent) of the Equity Securities held by them at the relevant time as part of the QIPO, subject to applicable Laws and the rules and regulations of the Relevant Market(s) on which the Equity Securities are listed pursuant to the QIPO, the Sponsors shall either not offer any Equity Securities for sale or offer for sale such further number of Equity Securities as may be required by applicable Laws to be offered to the public as a condition for obtaining listing on any Relevant Market. The Sponsors shall not withhold approval and shall do all acts and deeds as may be required to effectuate the QIPO and to allow the Investors to exercise their right to offer up to 100% (one hundred per cent) of the Equity Securities held by each of them. |
7.6 | In case the Equity Securities offered by the Investors for sale through the QIPO exceed the number of Equity Securities that in the opinion of the merchant bankers/investment bankers to the issue are appropriate considering the market appetite and conditions, then the Investors agree to offer their Equity Securities for sale through the QIPO in the following ratio: |
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The number (and if this is not a whole number, such number rounded to the nearest whole number) obtained by multiplying the number of the Equity Securities of the Company on an Fully Diluted Basis that are to be offered as part of the QIPO by a fraction: (i) the numerator of which shall be the number of Equity Securities of the Company on a Fully Diluted Basis held by the Investor intending to offer its Equity Securities through the QIPO; and (ii) the denominator of which shall be the aggregate number of Equity Securities of the Company on a Fully Diluted Basis held by all the Investors.
7.7 | The Sponsors shall do all the acts and deeds required to effectuate the QIPO and to allow the Investors to exercise their right to offer their Equity Securities, including without limitation, preparing and signing the relevant offer documents, conducting road shows, entering into such documents, providing all necessary information and documents necessary for preparing the offer document, obtaining such regulatory or other approvals and doing such further acts or deeds as may be necessary or are customary in transactions of such nature, or do all acts necessary to facilitate the Investors right to offer their Equity Securities. |
7.8 | Subject to applicable Laws, the Investors shall be entitled to freely Transfer up to all of the Equity Securities held by them subsequent to the occurrence of the QIPO and consequent listing of the Equity Securities. |
7.9 | Subject to applicable Laws, the Investors shall not be considered as a promoter of the Company or the issue, and the Equity Securities held by the Investors shall not be subject to any statutory lock-in restrictions with respect to the QIPO. In the event that any Equity Securities are to be made subject to any lock-in in connection with any QIPO, then the Sponsors shall offer their Equity Securities towards such lock-in. |
7.10 | All costs and expenses relating to the QIPO including statutory filing and registration fees, and fees for advisors and managers to the QIPO, shall be borne by the Company. |
8. | REINSTATEMENT OF RIGHTS |
8.1 | In the event that: |
(a) | The prospectus or the offer document is filed with the appropriate Authority or the Relevant Market, as applicable, in respect of any proposed QIPO or IPO (as applicable) and, in connection with such filing, such Authority or Relevant Market requires the alteration of the class of any of the Equity Securities held by the Investors and/or the rights attaching to any of the Equity Securities held by the Investors and/or the rights set out in the Shareholders Agreement (such alterations being, collectively, the Conforming of Rights ); and |
(b) |
Within 30 (thirty) days following the filing of the prospectus or offer document by the Company (the expiry of such thirty (30) day period, being referred to as the Listing |
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Date , the QIPO or an IPO (as applicable) does not complete such that the entire issued, paid-up and subscribed share capital (other than Equity Shares that are agreed by the Investors to be subject to lock-in post QIPO/IPO) is admitted to trading on a Relevant Market by the expiry of the Listing Date, |
then the Investors shall be placed in the same position and shall have the same preferential and other rights, they had the benefit of, immediately prior to the Conforming of Rights, and the Company and the Sponsors shall undertake all necessary actions as may be required by the Investors to ensure that the Investors are placed in the same position, and possess the same preferential and other rights, they had the benefit of, immediately prior to the Conforming of Rights.
8.2 | Notwithstanding anything provided in this Constitution, the Company and the Sponsors undertake and covenant to the Investors that they shall, within 10 (ten) Business Days of the Listing Date (if the QIPO or an IPO, as the case may be) has not completed by that date) or the earlier date on which the QIPO or an IPO, as the case may be is cancelled or discontinued, take all such actions and do all such things as may be requested by the Investors and/or otherwise required. The Sponsors and the Company undertake to enter into any contractual arrangements to restore the Investors respective rights to the rights they enjoyed or had the benefit of immediately prior to any Conforming of Rights and support all such decisions and actions, by exercising their respective voting and other rights, to ensure all the necessary, required or requested resolutions of the Board and the Shareholders of the Company, to effect the actions contemplated above, which steps shall include without limitation: |
(a) | Conversion of the Company into a private limited company; and |
(b) | The alteration of the Constitution to include all of the rights attaching to the Applicable Investor Securities immediately prior to the Conforming of Rights. |
8.3 |
Subject to the Law, if the QIPO/IPO does not complete by the IPO Failure Date, each of IFC, DEG and Proparco shall have the unconditional right to require the Company by way of a written notice ( Swap Notice ) to buyback all or part of the CCDs and/or Proparco CCPS held by them and as a consideration for such buy back of CCDs and/or Proparco CCPS, transfer to IFC, DEG and/or Proparco CCPS (as the case may be) an equal number of compulsorily convertible debentures and/or compulsorily convertible preference shares of AZI that carry similar rights and preference in AZI ( AZI Securities ) as are carried by CCDs and/or Proparco CCPS in the Company that are being bought back. It is clarified that the no additional amounts or consideration (other than tendering their CCDs and/or Proparco CCPS in the buy back by the Company) shall be payable by IFC, DEG and/or Proparco for the purchase of AZI Securities as stated above. It is further clarified that the right under this Article 8.3 can be exercised by each of IFC, DEG and Proparco individually. On the receipt of the Swap Notice, the Company shall provide a copy to all Investors and Sponsors at the earliest possible, and |
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shall ensure that the process of buy back of CCDs and/or Proparco CCPS and the transfer of AZI Securities as required by this Article 8.3 is completed within thirty (30) days of the receipt of the Swap Notice by the Company. |
On the transfer of AZI Securities to IFC, DEG and/or Proparco (as the case may be), the Company, Sponsors and other Parties to the Shareholders Agreement shall ensure that IFC, DEG and/or Proparco are made parties to the AZI Shareholders Agreement, which shall be amended to provide IFC, DEG and/or Proparco with similar rights and preference in AZI as were available to them as holders of AZI Securities pursuant to the Existing AZI Shareholders Agreement. All cost and expenses incurred to give effect to this Article 8.3 shall be borne by the Company or AZI.
All Parties hereby unconditionally agree to execute such contractual arrangements and support all such decisions and actions, by exercising their respective voting and other rights, to ensure all the necessary, required or requested resolutions of the Board and the Shareholders of the Company, to effect the actions contemplated above.
9. | BUY-BACK OF EQUITY SECURITIES |
9.1 | Subject to applicable Law, any time after the expiry of QIPO Due Date, if the Company has not successfully conducted the QIPO, each of the Investors shall have option at its discretion to require the Company to buy back all or part of the Equity Securities held by such Investor in accordance with this Article 9 (the Buy Back Option ). In addition to the above, at any time before the expiry of QIPO Due Date, (i) Proparco shall have the right to exercise the Buy Back Option under this Article 9 in the event of a breach of the terms of Proparcos policy covenants as specified under Schedule P of the Shareholders Agreement; (ii) Each of GIF and IFC shall have the right to exercise the Buy Back Option under this Article 9 in the event of a breach of the terms of IFC Policy Covenants as specified under Schedule K of the Shareholders Agreement; and (iii) DEG shall have the right to exercise the Buy Back Option under this Article 9 in the event the Company or any of its Subsidiaries engage in any of the activities as set out in Schedule O of the Shareholders Agreement. |
Upon any of the Investors notifying the Company in writing (the Buy Back Notice ) of its decision to exercise the Buy Back Option in accordance with the preceding paragraph, the Company shall within 3 (three) Business Days of receipt of the Buy Back Notice inform about the exercise of Buy Back Option and provide a copy of the Buy Back Notice to all other Investors (the Buy Back Intimation ). It is clarified that on the delivery of Buy Back Notice to the Company by any of GIF, IFC, DEG or Proparco for a breach of the terms of Schedule P, Schedule K and Schedule O in the manner set out above, all Investors shall be entitled to exercise the Buy Back Option. The Company shall initiate the process of buy back of the Equity Securities after the completion of 30 (thirty) Business Days from the date of the Buy Back Intimation (the Buy Back Start Date ), which date in any event shall not be later than 33 (thirty three) Business Days from the receipt of the Buy Back Notice by the Company. The
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Company shall consider all the Buy Back Notices delivered by the Investors before the Buy Back Start Date for initiating the process of buy back of the Equity Securities.
The Company shall be obligated to buy back from such Investors who have exercised the Buy-Back Option the maximum number of Equity Securities as specified by such Investors in the Buy Back Notice that the Company is permitted to buy back in accordance with applicable Law within the Buy-Back Period (as defined below), and if not permitted by applicable Law to buy back in that period, the Company shall conduct the buyback as and when permitted by applicable Law (from time to time) to the maximum extent permissible till all the Equity Securities specified by the Investors in the Buy Back Notice have been bought back in accordance with this Article 9.
The Buy-Back Period shall mean a period of 60 (sixty) days from the date of the Buy Back Start Date, and for buy back of residual Equity Securities after the first mentioned Buy-Back Period, within a period of 60 (sixty) days starting from the time the Company becomes eligible or entitled to buy-back the Equity Securities. It is clarified that, if the Company is not permitted to buy back within a period of 60 (sixty) days from the date of the Buy Back Start Date due to any reason, including the Company not having satisfied the financial tests as required by applicable Law for the buyback of shares, then the Company shall undertake such buy-back in the succeeding Buy-Back Periods as permitted by applicable Law, along with the buy-back pursuant to Buy Back Options exercised by any other Investor.
It is agreed that subject to compliance with the applicable Law, the buyback of the CCDs may be implemented by the Company by way of redemption of the CCDs for the amounts and preference as set out in this Article 9, and all provisions of this Article 9 shall apply mutatis mutandis to such redemption as are applicable to the buyback of Equity Securities.
9.2 | Notwithstanding anything contained in the Transaction Documents, if required by applicable Law, any Investor exercising its Buy-Back Option under this Constitution shall convert the Equity Securities held by it into Equity Shares of the Company in accordance with Schedule C to Schedule J and Schedule R , Schedule S , Schedule T and Schedule U (as the case may be) of the Shareholders Agreement prior to the actual buy-back, and the Company shall take all such steps to ensure such conversion. For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by IFC, DEG and/or Proparco pursuant to the conversion of the CCDs and Proparco CCPS shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Article 9, save and except where the CCDs and Proparco CCPS are converted into Equity Shares of the Company on or immediately prior to and only in connection with IFC, DEG and/or Proparco exercising its Buy-Back Option under this Constitution, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the CCDs and Proparco CCPS will be entitled to priority in terms of payment in the like manner as the CCDs and Proparco CCPS, as set out in Article 9.3. |
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9.3 | The Buy-Back Option shall be exercised in accordance with, and subject to, applicable Law. In the event that all the Equity Securities (including Equity Shares issued upon conversion of the Equity Securities) as specified by the Investors cannot be bought back by the Company due to operation of Law (including the Act), and if on the date of the Buy Back Notice, the number of Equity Securities that can be bought back by the Company is less than the number of Equity Securities that are required by the Investors to be bought back, the Company undertakes to effect a buy back in accordance with Article 9.3.2. |
9.3.1 | In the event that the buy-back is effected under this Article 9.3, (a) the Shareholders agree that they shall honour the buy-back preferences under Article 9.3.2 and to the extent necessary to honour the provisions of Article 9.3.2, they shall not tender their Equity Securities for buy-back nor shall they raise any objection to the Company accepting the tender by the other Investors of the Equity Securities held by them under such Buy Back Option; and (b) the Sponsors undertake that they shall not tender their Equity Securities for buy-back nor shall they raise any objection to the Company accepting the tender by the Investors of the Equity Securities held by them under such Buy-Back Option |
9.3.2 | Buy-Back Preferences |
(a) | Buy back of CCDs and Proparco CCPS |
The Company shall first buy back all the CCDs and Proparco CCPS for an amount equal to their respective Senior Liquidation Price plus any accrued and unpaid interest, within the Buy Back Period, in pro rata proportion to the amount due to them in this Article 9.3.2(a).
(b) | Buy back of Series H CCPS |
After buying back all of CCDs and Proparco CCPS in accordance with Article 9.3.2 (a) above, the Company will buy-back all Series H CCPS for an amount that provides the holders of the Series H CCPS an amount equal to Series H Liquidation Price plus any accrued and unpaid dividends thereon, within the Buy Back Period, in pro rata proportion to the amounts due to the holders of the Series H CCPS under this Article 9.3.2(b).
(c) | Buy back of Series F CCPS |
After buying back all of CCDs, Proparco CCPS and Series H CCPS in accordance with Article 9.3.2 (a) and Article 9.3.2 (b) above respectively, the Company
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will buy back such number of Series F CCPS for an amount that provides the holders of the Series F CCPS an amount equal to 150% (one hundred and fifty percent) of the Series F Investment Amount, plus any accrued and unpaid dividends thereon, within the Buy Back Period, in pro rata proportion to the amounts due to the holders of the Series F CCPS under this Article 9.3.2(c).
The number of Series F CCPS to be bought back under this Article 9.3.2 (c) shall be such that after the buy-back in accordance with this Article 9.3.2 (c), the holders of the Series F CCPS are left with such number of Series F CCPS as will be required by them to receive amounts pursuant to Article 9.3.2 (f).
(d) | Buy back of Series B CCPS/ Series C CCPS/ Series D CCPS |
After buying back all of (i) CCDs and Proparco CCPS in accordance with Article 9.3.2 (a) above; and (ii) Series H CCPS in accordance with Article 9.3.2 (b) above; and (iii) Series F CCPS in accordance with Article 9.3.2 (c) above, the Company will buy back all Series B CCPS, Series C CCPS and Series D CCPS for an amount that is equal to 200 % (two hundred per cent) of the Series B Investment Amount, Series C Investment Amount and Series D Investment Amount, as applicable, plus any accrued and unpaid dividends, within the Buy Back Period, in pro rata proportion to the amounts due to them in this Article 9.3.2(d).
(e) | Buy back of Series A CCPS |
After buying back all the Equity Securities in accordance with Article 9.3.2 (a), (b), (c) and (d) above, the Company will buy back all Series A CCPS for an amount equal to 140% (one hundred and forty per cent) of the Series A Investment Amount plus any accrued and unpaid dividends, within the Buy Back Period, in pro rata proportion to the amounts due to them in this Article 9.3.2 (e).
(f) | Buy Back of remaining Shares |
After honouring the buy-back preferences under this Articles 9.3.2(a), (b), (c),(d) and (e), the Company may buy back Equity Shares of the Company, in a manner such that the holders of the outstanding Series F CCPS are entitled participate in the buy-back pro rata along with the holders of other Equity Shares. Notwithstanding the foregoing, the holders of Series F CCPS shall be
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entitled to an amount not more than the Series F Participation pursuant to the buy back in this Article 9.3.2(f). It is clarified that the number of Equity Shares that the outstanding Series F CCPS shall be converted into for the purpose of this Article 9.3.2(f) shall be determined such that the holders of the outstanding Series F CCPS do not receive any amount in excess of Series F Participation. The Company shall not buy-back Equity Shares under this Article 9.3.2(f) from any holder of Equity Shares unless such buy back provides an opportunity to the holders of Series F CCPS to receive their Series F Participation as set out above.
Upon exercise of the Buy-Back Option in accordance with Article 9.3 above:
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Article 9.3.2) on or immediately prior to the exercise of the Buy-Back Option under Article 9.3.2; and |
(ii) | if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective entitlement in the manner provided in Article 9.3.2) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective entitlement in the manner provided in Article 9.3.2) from the proceeds available from the exercise of the Buy-Back Option is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their share in the proceeds available from the buy-back of Equity Securities) if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the Buy-Back Differential Amount ), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the Buy-Back Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation.
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9.4 | After all the payments have been made in accordance with Article 9.3.2 (a), (b), (c), (d),(e) and (f) above, the Investors shall have no right whatsoever in respect to any proceeds remaining with the Company. However, nothing contained in the preceding sentence shall restrict the rights available to the Investors under the applicable Law, including a right to claim damages for breach of the Transaction Documents. |
9.5 | The Sponsors agree and undertake that they shall honour the buy-back obligations of the Company as set out in this Article 9. |
9.6 | For the purposes of this Article 9, the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Article 9.6 shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
9.7 | If the Company intends to request a buyback of the equity securities it holds in AZI to generate cash required to pay for the buyback of the Equity Securities held by the Investors under this Article 9, then the Company shall cause AZI to initiate and complete the buyback of the equity securities of AZI held by the Company that carry similar rights and preference in AZI as are carried by the Equity Securities in the Company that are required to be bought back by the Company pursuant to this Article 9. The buyback of the equity securities of AZI shall be done on a proportionate basis to the number of Equity Securities in the Company that are required to be bought back by the Company. The buyback of the equity securities of AZI shall be in accordance with the AZI Shareholders Agreement. |
9.8 | Without prejudice to the rights of the Investors to exercise the Buy Back Option, if the Company is not able to buyback the CCDs and/or Proparco CCPS from IFC, Proparco and/or DEG (if required by them) within 60 (sixty) days from the date of the Buy Back Start Date, then IFC, Proparco and/or DEG shall have the option to exercise their rights as set out in Article 8.3 above with respect to the CCDs and/or Proparco CCPS which have not been bought back by the Company. |
9A | BUY-BACK FROM IFC, DEG OR PROPARCO |
9A.1 | Buy Back at IFCs/DEGs/ Proparcos Option |
(i) | Without prejudice to Article 9, if upon conversion (where the conversion ratio for the CCDs is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I and Schedule R of the Shareholders Agreement as applicable, and |
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for Proparco CCPS as provided in paragraph 4.2 of Schedule J and Schedule of the Shareholders Agreement, as applicable), the CCDs and Proparco CCPS do not provide IFC, DEG and/or Proparco their respective Required Return, then IFC, DEG and/or Proparco may, within 15 (fifteen) Business Days from the date of the conversion of the CCDs and Proparco CCPS, by a written notice ( IFC/DEG/ Proparco Buy-Back Notice ) to the Company, require the Company to buy back all the Equity Shares acquired by IFC, DEG and/or Proparco upon conversion of their respective CCDs and Proparco CCPS. For the purposes of the above conversion of the CCDs and Proparco CCPS, the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2(i)(b) of Schedule E, Schedule H Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, as applicable.
(ii) | Upon receipt of the IFC/ DEG/ Proparco Buy Back Notice, the Company shall be obligated to buy back, in accordance with applicable Law, all Equity Shares acquired by IFC, DEG and/ or Proparco upon conversion of the CCDs and Proparco CCPS, within a period of 30 (thirty) Business Days from the date of the IFC/ DEG/ Proparco Buy Back Notice ( IFC/DEG/ Proparco Buy Back Option ). If the Company is not permitted to buy back all Equity Shares acquired by IFC, DEG and/or Proparco within a period of 30 (thirty) Business Days from the date of the IFC/DEG/Proparco Buy-Back Notice due to restrictions under applicable Law, the Company shall buy back the maximum number of Equity Shares held by IFC, DEG and/or Proparco in such manner as permitted by applicable Law till all the Equity Shares held by IFC, DEG and/or Proparco are bought back in accordance with this Article 9A.1. |
(iii) | The said Equity Shares shall be bought back by the Company for an amount equal to the applicable Senior Liquidation Price plus any accrued and unpaid interest. Provided that if the IFC/ DEG/ Proparco Buy Back Option is proposed to be exercised prior to the expiry of QIPO Due Date, then the Company shall require the consent of Helion and FC prior to completing the buyback. Provided however, consent shall not be required from Helion and FC where the buy-back is undertaken by the Company under Article 9. |
9A.2 | Buy Back at Companys Option |
Without prejudice to Article 9, if upon conversion (where the conversion ratio for the CCDs and Proparco CCPS is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, respectively), the CCDs and Proparco CCPS provides IFC, DEG and/ or Proparco (as
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the case may be) a return in excess of their respective Required Return, then the Company may, within 15 (fifteen) Business Days from the date of the conversion of the CCDs and Proparco CCPS, subject to the prior approval of Helion and FC, by a written notice ( Company Buy Back Notice ) to IFC, DEG and/ or Proparco, have the right to buy back and IFC, DEG and/ or Proparco shall have the obligation to offer for buy back, such number of Equity Shares as is required to reduce IFCs or DEGs or Proparcos shareholding to such percentage as is adequate to give IFC, DEG and/ or Proparco their respective Required Return.
For the purposes of the above conversion the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2 (i)(b) of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T of the Shareholders Agreement, as applicable.
The said Equity Shares shall be bought back by the Company at the lowest price permissible under Law, within 30 Business Days from the date of the Company Buy Back Notice ( Company Buy Back Option ).
9A.3 | In the event that the buy-back is effected under this Article 9A.1 or Article 9A.2, then the Sponsors and Helion and FC agree that, they shall not tender their Equity Securities for buy back nor shall they raise any objection to the Company accepting the tender by IFC, DEG and/or Proparco of the Equity Shares held by it under the IFC/ DEG/Proparco Buy Back Option or the Company Buy Back Option. |
9A.4 | The Sponsors agree and undertake that they shall honor the buy-back obligations of the Company as set out in this Article 9A. |
9A.5 | It is hereby clarified that the rights of IFC, DEG and/or Proparco under Article 9A.1 are without prejudice and are independent to the rights of IFC, DEG and/or Proparco under Article 9 of this Constitution, and that the exercise by IFC, DEG and/or Proparco of rights under either Article 9 or Article 9A.1 shall not preclude IFC, DEG and/or Proparco from exercising rights under the other Article. |
9A.6 | For the purposes of this Article 9A, the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR |
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conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
10. | BORROWINGS & FUNDING |
The Shareholders hereto expressly agree that in the event the Company proposes to borrow funds from any Person, including but not limited to banks and financial institutions, the Investors shall not be asked, or be required to give any warranties, letter of comfort and/ or guarantees, of any nature whatsoever for any loans or with regard to any aspect of the business or functioning of the Company.
11. | MANAGEMENT OF THE COMPANY |
11.1 | Directors |
The business and affairs of the Company shall be managed by the Board.
11.2 | Board Composition |
11.2.1 (i) | IFC shall have the right to nominate 1 (one) Director to the Board ( IFC Nominee Director ) |
(ii) | GIF shall have the right to nominate 1 (one) Director to the Board of the Company ( GIF Director ); |
(iii) | Helion shall have the right to nominate 1 (one) Director on the Board of the Company (the Helion Director ); |
(iv) | FC shall have the right to nominate 1 (one) Director on the Board of the Company (the FC Director ); |
(v) | the Sponsors shall have the right to nominate 2 (two) Directors to the Board ( Sponsor Directors ), provided such Sponsor Directors shall be Employees or Shareholders or consultants of the Company or AZI; and |
(vi) | shareholders who are holding more than 50% (fifty percent) of the share capital of the Company on a Fully Diluted Basis shall have the right to nominate at least 1 (one) Director on the Board as an independent director ( Independent Director ) and two other Directors who are ordinarily resident in Mauritius. Mr. Robert Kelly and Ms. Diane Farell shall be the Independent Directors initially. |
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11.2.2 | Proparco shall have the right to nominate 1 (one) Director to the Board ( Proparco Director ) as long as IFC Nominee Director is not nominated to the Board by IFC, and on the appointment of the IFC Nominee Director on the Board, the Proparco Director (if nominated to the Board) shall automatically vacate the office of the Director. |
If at any time after his appointment, the IFC Nominee Director is no longer serving on the Board due to any reason, and such vacancy has not been filled in accordance with Article 11.2.1 within a period of 2 (two) months, then Proparco shall have the right to nominate the Proparco Director on the Board till the time IFC Nominee Director is not nominated on the Board by IFC.
It is clarified that vacation of the office of the Director by the Proparco Director as required under the preceding paragraph shall not affect or waive Proparcos right to nominate a director on the Board if it again becomes eligible to nominate a Director in accordance with this Article 11.2.2.
Nothing contained in this Article 11.2.2 shall affect IFCs right to nominate a director on the Board at its discretion in accordance with Article 11.2.1.
11.2.3 | Each of the Nominating Investors shall have a right to nominate a Director on the Board in accordance with this Article 11.2 as long as such Nominating Investor holds at least 2% (two per cent) of the total issued and paid up share capital of the Company on a Fully Diluted Basis. |
11.2.4 | If the IFC Nominee Director is not an employee of IFC, then the Company shall pay sitting fees and reimburse travel and other expenses of such Director for attending the meetings of the Board (including any sub-committee) thereof subject to a cap of USD 10,000 (Dollars Ten Thousand) per year. |
11.2.5 | The Company shall reimburse the reasonable travel and other expenses incurred for attending the meetings of the Board (including any sub-committees) by the GIF Director. |
11.3 | Removal of a Director |
Subject to applicable Law, the Party nominating a Director pursuant to Article 11.2 shall have a right to require the removal of the Director nominated by such Party by giving a written notice to the Company. On the receipt of such notice by the Company, the Company shall convene a shareholders meeting to resolve on the removal on the Director, and the
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Shareholders hereby agree to vote and pass appropriate resolution to give effect to the removal of the Director as requested by the Party nominating such Director. Subject to the applicable Laws, the Shareholders agree that with respect to the Investor Directors and Sponsor Directors, in pursuance of Article 11.2, the power to nominate and to propose a removal of a Director lies solely with the Party so entitled to nominate that Director. The Party nominating a Director shall from time to time, by like notice, have the right to appoint any other person to be a Director in the place of the Director so removed or in the place of any Director vacating office as a result of being removed by the Shareholders.
11.4 | No Qualification Shares |
A Director does not need to hold any qualification shares.
11.5 | Term of Directors |
Subject to the applicable Laws, the Directors in Article 11.2.1 and Article 11.2.2 shall hold office at the pleasure of the Nominating Investors and may be substituted at any time by the Nominating Investors by notice to the Company. The Directors, as then constituting the Board, and/or the Shareholders shall pass required resolutions in order to appoint or remove a person as a Director as advised by the respective Nominating Investor by notice to the Company.
11.6 | Casual Vacancies |
If any Director resigns, vacates or is removed from office before his term expires, the resulting casual vacancy may be filled by a nominee of the Party who originally nominated the Director vacating office, but any Person so nominated, shall retain his office only so long as the vacating Director would have retained the same, if no vacancy had occurred. The Shareholders agree that in the case of any casual vacancy in the office of the Independent Director or the Directors that are resident of Mauritius, the same shall be filled in accordance with Article 11.2.1(vi).
11.7 | Proceedings of the Board |
11.7.1 | Number of Board meetings and Venue |
The Board shall meet at least 4 (four) times in every calendar year and at least once in every calendar quarter. Meetings of the Board shall ordinarily be held in Mauritius. A Board meeting may also be held outside Mauritius at such other places as may be agreed by a majority of the Directors, from time to time. A Board meeting may also be held by teleconference or video conferencing and/ or the presence of a Director at a meeting may be recorded if he is present over telephone or video conferencing, and
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shall be counted for the purpose of quorum.
11.7.2 | Convening meetings of the Board |
Any Director may, and the company secretary, shall on the requisition of a Director, summon a meeting of the Board, in accordance with the notice and other requirements set out in this Article 11.7.
11.7.3 | Notice for Board Meetings |
At least 15 (fifteen) Business Days prior a written notice shall be given to each of the Directors of any meeting of the Board. A meeting of the Board may be held at shorter notice with the written consent (which may be signified by letter, facsimile or e-mail with receipt acknowledged) of all Directors, or where all Directors attend the meeting without protest.
11.7.4 | Contents of Notice |
Every notice convening a meeting of the Board shall set forth in full and sufficient detail the business to be transacted thereat, and no item or business shall be transacted at such meeting unless the same has been stated in full and in sufficient detail in the notice convening the meeting, except as otherwise consented to by all the Directors, or their alternates, present at the meeting. The draft resolutions and other documents for all matters to be considered at the Board meeting must be furnished to all the Directors at least 7 (seven ) Business Days prior to the date of the proposed Board meeting, except where such meeting is called on shorter notice. The secretary of the Company shall prepare the notice for the meetings. If the secretary is unavailable, unwilling or unable to do so, the Director that summoned the meeting shall prepare the notice.
11.7.5 | Quorum for the Board Meetings |
(i) | The quorum for a Board meeting shall require the presence of the IFC Nominee Director (if nominated by IFC), the Proparco Director (if nominated in accordance with Article 11.2.2), the GIF Director, 1 (one) Sponsor Director, 1 (one) from among the Helion Director and FC Director and 1 (one) Director who is ordinarily resident in Mauritius. A meeting of the Board shall not be held or continued without meeting the requirement of this Article 11.7.5, unless such Director has expressly waived the requirement for his presence |
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either in writing or by facsimile transmission and in that case that Director shall not be required for quorum.
Notwithstanding anything contained in this Article 11.7.5 (i) above, in the event any of the Director as required to form quorum is unable to attend the scheduled Board meeting, he shall provide a written request to the Company, at least 5 (five) days prior to the date of the proposed Board meeting, to postpone the Board meeting (the Postponement Notice ), in which case such Board Meeting shall be postponed to such date which shall not be later than 7 (seven) days from the date of the scheduled Board meeting. In the event such a Director fails to provide a valid Postponement Notice, the Board meeting shall convene as scheduled without the Director who has failed to give the Postponement Notice and the Directors present at such meeting shall constitute the quorum. In the event a Director provides the Postponement Notice and, thereafter is not present or has not nominated an alternate on his behalf at the rescheduled Board Meeting, then the Board can proceed with such Board meeting and its agenda without the Director who has served the Postponement Notice and is absent from such rescheduled Board meeting and the Directors present at the meeting shall constitute the quorum.
(ii) | Notwithstanding anything contained in Article 11.7.5 (i), the quorum for any Board meeting (including a rescheduled Board meeting) in which the agenda includes the items in Article 34.1 and Article 34.2 shall require the presence of the Helion Director, FC Director, Proparco Director (if appointed), IFC Nominee Director (if appointed) and GIF Director. |
11.7.6 | Committees of the Board |
A committee of Directors or other Persons, to whom any powers of the Board are delegated, can be appointed only by the Board. The Nominating Investors shall have the right to have their nominees as members of any such committee, the number of such nominees being subject to Board approval. The provisions pertaining to the Board in this Constitution shall also pertain to every committee of the Board.
11.7.7 | Resolution in writing |
The Board may act by resolution in writing, or in any other legally permissible manner, on any matter, except matters which by Law may only be acted upon at a meeting. Subject to any restrictions imposed by Law and the provisions of Article 11.8 of this
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Constitution, no resolution in writing shall be deemed to have been duly adopted by the Board, unless such resolution in writing has been approved by all Directors.
11.7.8 | Chairman |
The Chairman of the Board shall be selected by the members of the Board at every Board meeting The Chairman shall not have a casting vote.
11.7.9 | Alternate Directors |
The Board shall, if requested by the original Director or the Party that nominated the original Director, appoint an alternate director to act as a Director during the absence of any Director from Mauritius. The original Director in whose place such alternate director is to be appointed, or failing him the Party that appointed the original Director, shall recommend the alternate Director to the Board. The alternate Director shall, ipso facto vacate office as and when the original Director returns to Mauritius. The alternate Director shall have such powers and rights as are available to the original Director in whose place such alternate Director is appointed.
11.8 | Restrictions on the Powers of the Board and the Shareholders |
11.8.1 | Notwithstanding anything to the contrary contained in this Constitution, but subject to the terms of Article 11.8.4 of this Constitution, the decisions on items mentioned in Article 34.1 shall not be taken and/or implemented by the Company and its Subsidiaries at a meeting of their respective board of directors or at a meeting of their respective shareholders unless the prior written consent in favour of such decision has been obtained from all the Investors. |
11.8.2 | Notwithstanding anything to the contrary contained in this Constitution but subject to the terms of 11.8.4 of this Constitution, the decisions on items mentioned in Article 34.2 , shall not be taken and/or implemented by the Company and its Subsidiaries, at a meeting of their respective board of directors or at a meeting of their respective shareholders, unless the prior written consent in favour of such decision has been obtained from the Majority Investors. For the purpose of this Article, the term Majority Investors shall mean the Investors who by virtue of their shareholding collectively hold more than 50% (fifty per cent) of the aggregate shareholding of the Investors in the Company on an As If Converted Basis. Any of the Investors will only be included in the definition of Majority Investor only till such time till they hold 5% (five per cent) of the shareholding of the Company on an As If Converted Basis. |
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11.8.3 | Upon the Transfer of the CCDs and/or Proparco CCPS from IFC, DEG and/or Proparco (as the case may be) to any Person, the decisions on items mentioned in Article 34.2, shall not be taken and/or implemented by the Company and its Subsidiaries, at a meeting of their board of directors or at a meeting of their Shareholders, unless the prior written consent in favour of such decision has been obtained from the Super-Majority Investors. For the purpose of this Article, the term Super-Majority Investors shall mean the Investors who by virtue of their shareholding (excluding any of the CCDs that are continued to be held by IFC and/or DEG and the Proparco CCPS that are continued to be held by Proparco) collectively hold more than 85% (eighty five per cent) of the aggregate shareholding of the Investors in the Company on an As If Converted Basis. Any of the Investors will only be included in the definition of Super Majority Investor only till such time till they hold 5% (five per cent) of the shareholding of the Company on an As If Converted Basis. For the purpose of this Article 11.8.3, the Investors shall include the transferees of the Equity Securities held by the Investors. It is clarified that nothing contained in this Article 11.8.3 shall affect rights of the Investors under Article 11.8.2. |
11.8.4 | Upon the Transfer of any Equity Securities of the Company to a Competitor, the following items of Article 34.1 shall be deleted from Article 34.1 and moved to Article 34.2 and the provisions of Article 11.8.2 and Article 11.8.3 shall then also apply to the following items: |
(i) | Any sale or disposal of Assets of value more than USD 5,000,000 (United States Dollar Five Million) (other than pursuant to charge(s) on Assets created for securing borrowing(s) approved by Majority Investors in accordance with 34.2 (i)); |
(ii) | Giving of any guarantee or comfort letter by the Company or any Subsidiary to any Person that is not in relation to securing project finance, working capital limits or non-fund based facilities availed for solar power projects of the Company or any Subsidiary; |
(iii) | Entry into, amendment or termination of any agreement or commitment which imposes or is likely to impose obligations on the Company to make payments or otherwise incur liabilities exceeding the budget approved by the Board, except automatic authorization to the CEO in accordance Article 34.2 (a); and |
(iv) | Incurring any single item of capital expenditure (including acquiring a business |
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or asset) greater than INR 10,000,000 (Indian Rupees Ten Million).
11.9 | The Shareholders agree that the Company is entitled to set up (direct or indirect) wholly owned subsidiaries to execute the power projects granted to the Company, subject to Article 11.8. The Company and the Sponsors shall undertake to constitute the same structure of the board of directors as set out in Article 11.2 in all the Subsidiaries of the Company. |
11.10 | Liability of Investor Directors |
The Sponsors and the Company expressly agree and undertake that each of the GIF Director, Helion Director, FC Director, Proparco Director and the IFC Nominee Directors, if appointed, shall not be in charge of, or responsible for the day to day management of the Company and shall not be liable for any default or failure of the Company to the extent permitted under Law.
11.11 | Indemnification |
The Company agrees to indemnify all Directors to the maximum extent permitted by applicable Law, and shall enter into appropriate indemnification agreements with each Director reiterating the same. The Articles shall provide the broadest indemnification of directors permitted by Law. In addition to the above, the Company and the Sponsors agree to jointly and severally indemnify and keep each of IFC, DEG, GIF, FC, Helion and Proparco and their Affiliates, together with their respective officers, directors, employees, Affiliates, and agents (the Indemnified Parties ), indemnified, on demand, against each loss, liability and cost (including legal and other professional costs) suffered or incurred by the Indemnified Parties arising out of or in connection with the breach by the Sponsors and or the Company of the terms, conditions, representations, undertakings, warranties or other covenants or other provisions entered into or given by the Sponsors and/or the Company as contained in the Transaction Documents or in respect of, or in any manner related to, any act or omission of the Sponsors and/or the Company.
11.12 | Board of Directors of AZI |
The Shareholders acknowledge that the Company has a right to nominate 4 (four) directors on the board of directors of AZI. The Investors shall have the right to nominate these directors on the board of directors of AZI in such manner as they have under Shareholders Agreement with respect to the appointment of Directors on the Board of the Company. On receipt of a written notice from any Investor to appoint its nominee as a director on the board of directors of AZI, the Company shall take all required steps to ensure that the nominee of the Investor is appointed as a director on the board of directors of AZI. The Investor nominating a director on
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the board of directors of AZI shall also have the right to require the removal of the director nominated by such Investor by giving a written notice to the Company.
11.13 | Directors Interest |
11.13.1 | Subject to the Act and the Shareholders Agreement, a Director may: |
(a) | hold any other office or place of profit with the Company (except that of auditor) in conjunction with his office of Director for such period and upon such terms as the Board may determine. Any remuneration (whether by way of salary, commission, participation in profits or otherwise) paid to any Director in respect of any such other office or place of profit shall be in addition to any remuneration provided for by or pursuant to any other provision of this Constitution; |
(b) | act by himself or his firm in a professional capacity for the Company (otherwise than as auditor) and he or his firm may be remunerated for professional services as if he were not a Director; |
(c) | continue to be or become a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of any other company promoted by the Company or in which the Company may be interested as a vendor, shareholder or otherwise and (unless otherwise agreed) no such Director shall be accountable for any remuneration, profits or other benefits received by him as a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of or from his interests in any such other company. Subject as otherwise provided by this Constitution, the Directors may exercise or cause to be exercised the voting powers conferred by the shares in any other company held or owned by the Company, or exercisable by them as Directors of such other company in such manner in all respects as they think fit (including the exercise thereof in favour of any resolution appointing themselves or any of them as directors, managing directors, joint managing directors, deputy managing directors, executive directors, managers or other officers of such company or voting or providing for the payment of remuneration to the director, managing director, joint managing director, deputy managing director, executive director, manager or other officers of such other company) and any Director may vote in favour of the exercise of such voting rights in manner aforesaid notwithstanding that he may be, or about to be, appointed a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer of such a company, and that as such he is or may become interested in the exercise of such voting rights in manner aforesaid. |
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(d) | Subject to the Law, the Shareholders Agreement and this Constitution, no Director or proposed or intending Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the Shareholders for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relationship thereby established provided that such Director shall disclose the nature of his interest in any contract or arrangement in which he is interested in accordance with Article 11.13.1 (e) herein. |
(e) | To the full extent required by the Law, a Director shall, forthwith after becoming aware of the fact that he is interested in a transaction or proposed transaction with the Company, cause to be entered in the interests register of the Company where it has one, and disclose to the Board, the nature and monetary value of that interest or where the monetary value of the Directors interest cannot be quantified, the nature and extent of that interest. A general notice entered in the interests register or disclosed to the Board to the effect that a Director is a shareholder, director, officer or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, shall be a sufficient disclosure of interest in relation to that transaction. |
12. | SHAREHOLDERS MEETINGS |
12.1 | Shareholders Meetings |
An Annual Meeting of the Shareholders of the Company shall be held in accordance with the Act. Subject to the foregoing and the Act, the Board may convene a Special Meeting of the Shareholders whenever it deems appropriate.
12.2 | Notice for Shareholders Meetings |
At least 21 (twenty-one) days prior written notice of every meeting of the Shareholders shall be given to all Shareholders whose names appear on the Register of Members of the Company. A meeting of the Shareholders may be called by giving shorter notice with the written consent of all Shareholders, or where all Shareholders attend the meeting without protest.
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12.3 | Contents of Notice |
The notice to Shareholders shall specify the place, date and time of the meeting. Every notice convening a meeting of the Shareholders shall set forth in full and sufficient detail the business to be transacted thereat, and no business shall be transacted at such meeting unless the same has been stated in the notice convening the meeting. The draft resolutions to be considered at the shareholders meetings must be furnished to all the Shareholders along with the notice of the proposed meeting of the Shareholders.
12.4 | Chairman for Shareholders Meeting |
The Chairman of the immediately preceding Board meeting shall act as the Chairman of the meeting of the Shareholders, except (a) in the event such individual is not present for the meeting of the Shareholders, in which case the Shareholders may elect any other person as the Chairman, and (b) in the case of a meeting requisitioned by any Shareholders, in which case the Shareholders may elect any other person as the Chairman. The Chairman shall have no second or casting vote.
12.5 | Proxies |
Any Shareholder of the Company may appoint another Person as his proxy (and in case of a corporate Shareholder, an authorized representative) to attend a meeting and vote thereat on such Shareholders behalf, whether on poll or show of hands, provided that the power given to such proxy must be in writing.
12.6 | Quorum for Shareholders Meetings |
The presence of the authorised representative of each of the Investors shall be required to constitute quorum for a meeting of the Shareholders.
12.7 | Adjournment of Shareholders Meetings for lack of Quorum |
If within half an hour from the time appointed for holding a general meeting of the Company, a quorum is not present, the meeting shall stand adjourned for a period determined by the Board, but not less than 7 (seven) days. Notice of the adjourned meeting shall be provided to all the Shareholders along with the draft resolutions to be considered at the meetings at least 5 (five) days prior to the date of the adjourned meeting. The quorum requirements set out at Article 12.6 above shall apply at such adjourned meeting as well.
12.8 | Except as otherwise provided for herein, Shareholders Meetings shall be conducted in accordance with the fifth Schedule of the Act. |
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13. | EXERCISE OF VOTING & OTHER RIGHTS BY PARTIES |
13.1 | The Investors and the Sponsors jointly undertake to ensure that they, their representatives and proxies representing them at the meetings of the Shareholders of the Company shall at all times exercise their votes and through their respective appointed/ nominated Directors (or alternate directors) at Board meetings and otherwise, act in such manner so as to comply with, and to fully and effectually implement the spirit, intent and specific provisions of this Constitution. |
13.2 | If a resolution contrary to the terms of this Constitution is proposed at any meeting of Shareholders or at any meeting of the Board or any committee thereof, the Investors and the Sponsors, their representatives (including proxies) and their respective appointed/ nominated Directors (or alternate directors), shall vote against the same; provided, however, that if for any reason such a resolution is passed, the Shareholders shall, as necessary jointly convene or cause to be convened a meeting of the Board or any committee thereof or an extraordinary general meeting of the Shareholders for the purpose of implementing the terms and conditions of this Constitution and to give effect thereto, and to supersede such resolution. |
13.3 | The Investors and the Sponsors jointly agree and undertake to ensure that they shall abide by the terms of the CCDs, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS, Proparco CCPS and the Series A CCPS, as set out in the Shareholders Agreement and that they, their representatives and proxies representing them at the meetings of the Shareholders of the Company shall at all times exercise their votes and through their respective appointed/ nominated Directors (or alternate directors) at Board meetings and otherwise, act in such manner so as to comply with, and to fully and effectually implement the terms of the CCDs, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS, Proparco CCPS and the Series A CCPS, as set out in this Constitution. |
13.4 | From and after the issuance of the Equity Securities in accordance with the terms of the Transaction Documents, the Company shall exercise its voting rights in its Subsidiaries in such a manner so as to ensure that (A) the provisions with respect to consent rights of Investors under this Constitution, including Article 11.8, are given effect to; and (B) each Shareholder of the Company is able to vote on every resolution relating to the Subsidiary, to the extent of the voting rights available to the Shareholder in the Company. |
13.5 | It is agreed that nothing contained in this Article 13 shall affect the fiduciary duties and other obligations of the Directors as prescribed by the Act. |
14. | INFORMATION RIGHTS |
14.1 | For so long as each of the Investors holds any Equity Securities in the Company, the Company shall furnish to the Investors and/ or their assignees/ nominees the following: |
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(a) | Monthly, quarterly and annual financial statements of the Company prepared in accordance with United States GAAP (General Accepted Accounting Principles) and its Subsidiaries prepared in accordance with Indian GAAP (including an income statement, a statement of cash flow, a balance sheet, detailed break-down of working capital, including an aging analysis and comparisons to budget) within 15 (fifteen) days of the end of each month, within 30 (thirty) days of the relevant quarter, annual unaudited Accounts within 45 (forty five) days of the end of the Financial Year and annual audited financials within 90 (ninety) days of the end of the Financial Year. The formats of all such financial statements shall be mutually agreed amongst the Company, the Sponsors and the Investors. |
(b) | A certificate signed by the chief financial officer of AZI or a similar ranking employee of AZI on a quarterly basis certifying (i) that AZI has fulfilled and complied with the terms of all guarantees, comfort letter or any other security provided by AZI with respect to any loans or other borrowings availed by its Subsidiaries, (ii) that no breach or other event of default has occurred or is reasonably likely to occur in relation to the loans or other borrowings availed by the Subsidiaries from any bank or financial institution, and (iii) in case a breach or any other event of default has occurred or is reasonably likely to occur in relation to the loans or other borrowings availed by the Subsidiaries, the actions or steps taken by AZI and/or its Subsidiaries to remedy or prevent such breach or any other event of default, in each case in the form as required by the Investors. A certificate signed by the chief financial officer of the Company or a similar ranking employee of the Company covering all of the above mentioned particulars on an annual basis. The above mentioned certificates shall be provided along with the quarterly or annual financial statements of the Company respectively within the time period mentioned in sub-clause (a) above. |
(c) | Annual Business Plan and Budget of the Company and its Subsidiaries (including quarterly budget containing an income statement, a statement of cash flow, a balance sheet and detailed breakdown of working capital and head count), no later than 45 (forty five) days after the beginning of the Financial Year. |
(d) | Audited Accounts of the Company (both consolidated and unconsolidated) in accordance with US GAAP, and of AZI (both consolidated and unconsolidated) and its Subsidiaries in accordance with Indian GAAP (Generally Accepted Accounting Principles) within 120 (one hundred and twenty) days of the end of the Financial Year. |
(e) | Brief quarterly reports including a narrative describing the progress to-date of the Company and its Subsidiaries within 30 (thirty) days of the end of each quarter. |
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(f) | all information as required by Schedule W of the Shareholders Agreement with respect to the Company and its Subsidiaries on an annual basis within 90 (ninety) days from the end of each Financial Year; |
(g) | Any material information including appointment/ resignation of any key employee of the Company and its Subsidiaries other than the Key Managerial Personnel within a period of 7 (seven) days from the Company possessing knowledge of the same. |
(h) | All other information reasonably requested by the Investors or the Sponsors, as the case may be, or their nominees on the Board from time to time. |
(i) | All other information reasonably requested by Helion and FC or the Investor Directors appointed by Helion and FC, together, from time to time, which is required by either Helion or FC to meet its regulatory and tax obligations in any jurisdiction, including without limitation, information required to meet the rules and regulations of United States controlled foreign corporation and passive foreign investment company as set out in Schedule B of the Shareholders Agreement and United States tax compliance requirements. |
(j) | A copy of the conversion notice requiring the conversion of the Share Equivalents and a notice for buy back under Articles 9 and Article 9A, received by the Company from any Investor or served by the Company to any Investor, within a period of 3 (three) days of the receipt of such notice by the Company or of the date of such notice served by the Company, as applicable. |
(k) | Any notice or other communication received by the Company pursuant to the AZI Shareholders Agreement, immediately on its receipt by the Company. |
15. | ANNUAL BUSINESS PLAN AND BUDGET |
15.1 | Preparation of Annual Business Plan and Budget |
The Shareholders acknowledge that the business of the Company and its Subsidiaries will be conducted in accordance with the Annual Business Plan and Budget. Each Annual Business Plan and Budget shall be prepared under the direction and supervision of the CEO of the Company, if any, and shall be updated at least 60 (sixty) days prior to the beginning of each Financial Year of the Company. At least 30 (thirty) days prior to the beginning of each Financial Year of the Company, the Annual Business Plan and Budget shall be finalised and the CEO of the Company shall present the same to the Board.
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15.2 | Approval of Annual Business Plan and Budget |
The Annual Business Plan and Budget shall be approved by the Board. The Annual Business Plan and Budget may be amended only by a resolution of the Board passed in accordance with Article 11.8.
15.3 | Variances to Annual Business Plan and Budget |
Any variances to the Annual Business Plan and Budget shall be subject to the provisions of Article 11.8 above. Any cost, not previously included in the Annual Business Plan and Budget for a Financial Year, which has been approved by the Board in accordance with Article 11.8 shall be deemed to be included in the Annual Business Plan and Budget for that Financial Year.
16. | FINANCIAL ACCOUNTING AND AUDITS |
16.1 | Financial and accounting records |
The Company shall maintain true and accurate financial and accounting records of all operations in accordance with US GAAP, and in accordance with all relevant statutory and accounting standards and the policies from time to time adopted by the Board. The financial statements and Accounts of the Company shall be prepared in English and shall be audited on an annual basis.
16.2 | Statutory Auditors |
The Board shall recommend, and the Company in a meeting of the Shareholders shall appoint the statutory auditors for the Company from amongst the Big Four Accounting Firms. The Company shall cause AZI to appoint its statutory auditors from amongst the Big Four Accounting Firms that is recommended by the Board.
16.3 | Audit Committee and Compensation Committee |
The Board will establish and continue to have an audit committee (hereinafter referred to as the Audit Committee ) and a compensation committee, which will periodically review the salaries or other remuneration of all Key Managerial Persons including the CEO (the Compensation Committee ). The Investors shall at all times be entitled to appoint one nominee each on the Audit Committee and Compensation Committee.
17. | OTHER COVENANTS |
17.1 | Dividend up |
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Subject to applicable Law, the Company and the Sponsors covenant that they will take all steps to ensure that each of the Subsidiaries of the Company pays all of its profits as dividend to the Company on an annual basis.
17.2 | Dividend policy |
Subject to applicable Law, the Company and the Sponsors covenant that the dividend policy agreed to between the Company, Shareholders and all Subsidiaries and their lenders shall be satisfactory to IFC and DEG and shall be such that the Company is able to pay (i) 10% interest on IFC CCDs, and (ii) 5% interest on DEG CCDs and the IFC III CCDs on a quarterly basis.
17.3 | IFC Policy Covenants |
So long as IFC and/or GIF holds any Equity Securities in the Company, the Company shall comply and the Sponsors shall ensure that the Company and its Subsidiaries comply with IFCs standard policies on environment, social, anti-corruption, anti-money laundering and insurance issues, as provided in Schedule K of the Shareholders Agreement. The Company shall deliver to each of IFC and GIF, within 90 (ninety) days after the end of each Financial Year, an annual social and environmental performance report confirming compliance with the social and environmental action plan; and notify IFC and GIF, within 3 (three) days after the occurrence, of any social, labour, health and safety, security or environmental incident, accident or circumstance reasonably expected to have a material adverse social or environmental impact. In addition, GIF, IFC and the IFC compliance advisor ombudsman shall also have inspection and access rights.
17.4 | Insurance |
The Company shall (a) insure and keep insured on terms and conditions acceptable to IFC, with a reputable insurer or insurers all of the Companys and its Subsidiaries Assets and business which can be insured, against insurable losses, on a reinstatement basis utilizing current full replacement values, including insurance covers listed in Schedule V of the Shareholders Agreement and any other insurance required by Law. The policies shall be in the English language; and the Company shall and shall ensure that its Subsidiaries shall (b) punctually pay any premium, commission and any other amount necessary for effecting and maintaining in force each insurance policy; and (c) maintain business interruption policy, third party liability policy and insurance policy for the head office, for an insurable amount satisfactory to IFC and DEG. [In particular, the Company shall obtain a) a directors and officers liability insurance policy for the Director nominated by Helion, FC, IFC, GIF and Proparco within 10 (ten) Business Days of the appointment of such Director on the Board, and b) an advanced loss of profit policy within 30 (thirty) days of such a request by IFC and/or
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DEG, on such terms that are reasonably satisfactory to IFC/DEG and the Company, and all costs in relation to these insurance policies shall be borne by the Company.
17.5 | Other Covenants |
17.5.1 | The Company covenants to ensure the development, implementation and continuing operation of the S&E Management System (as defined under the IFC Subscription Agreement). |
17.5.2 | Through its Employees, agents, contractors and subcontractors, the Company covenants to, ensure that the design, construction, operation, maintenance and monitoring of all its sites, plants, equipment and facilities are undertaken in compliance with: (i) the Performance Standards (as defined under the IFC Subscription Agreement); and (ii) the S&EA (as defined under the IFC Subscription Agreement). |
17.5.3 | The Company shall not and shall ensure that each of its Subsidiaries shall not enter into a business relationship with any person which is the target of economic sanctions administered by the OFAC or provide any financing or services to, or in connection with, any activity in any sector under Embargo by the United Nations. |
17.6 | Proparcos Policy Covenants |
So long as Proparco holds any Equity Securities in the Company, the Company, Sponsors and the Investors shall comply and the Sponsors shall ensure that the Company complies with Proparcos standard policies on environment, social, anti-corruption, anti-money laundering and insurance issues, as provided in Schedule P of the Shareholders Agreement.
18. | TERMS AND CONDITIONS OF THE CCPS AND CCDS |
18.1 | The terms and conditions of Series A CCPS shall be as set out in Schedule C of the Shareholders Agreement. |
18.2 | The terms and conditions of Series B CCPS shall be as set out in Schedule D of the Shareholders Agreement. |
18.3 | The terms and conditions of the IFC CCDS shall be as set out in Schedule E of the Shareholders Agreement. |
18.4 | The terms and conditions of Series C CCPS shall be as set out in Schedule F of the Shareholders Agreement. |
18.5 | The terms and conditions of Series D CCPS shall be as set out in Schedule G of the Shareholders Agreement. |
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18.6 | The terms and conditions of DEG CCDs shall be as set out in Schedule H of the Shareholders Agreement. |
18.7 | The terms and conditions of IFC II CCDs shall be as set out in Schedule I of the Shareholders Agreement. |
18.8 | The terms and conditions of Series E CCPS shall be as set out in Schedule J of the Shareholders Agreement. |
18.9 | The terms and conditions of IFC III CCDs shall be as set out in Schedule R of the Shareholders Agreement. |
18.10 | The terms and conditions of Series F CCPS shall be as set out in Schedule S of the Shareholders Agreement. |
18.11 | The terms and conditions of Series G CCPS shall be as set out in Schedule T of the Shareholders Agreement. |
18.12 | The terms and conditions of Series H CCPS shall be as set out in Schedule U of the Shareholders Agreement. |
REGISTER OF SHAREHOLDERS AND REGISTER OF DEBENTURE HOLDERS
19. | REGISTER OF SHAREHOLDERS AND DEBENTURE HOLDERS |
19.1 | REGISTER OF SHAREHOLDERS |
19.1.1 | The Company shall keep in one or more books a Register of Members and shall enter therein particulars required by the Act. |
19.1.2 | The Register and branch register of Shareholders, as the case may be, shall be open to inspection for such times and on such days in accordance with the Act. The Register including any overseas or local or other branch Register of Members may be closed at such times or for such periods not exceeding in the whole thirty (30) days in each year as the Board may determine and either generally or in respect of any class of Equity Securities. |
19.1.3 | No Shareholder or intending Shareholder shall be entitled to have entered in the Register any indication of any trust (expressed, implied or constructive) or any equitable, contingent, future or partial interest in any Equity Security or any fractional part of an Equity Security. |
19.2 | REGISTER OF DEBENTURE HOLDERS |
19.2.1 | The Company shall keep in one or more books a Register of debenture holders and shall enter therein particulars required by the Act. |
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19.2.2 | The Register of debenture holders shall be open to inspection for such times and on such days in accordance with the Act. The Register of debenture holders may be closed at such times or for such periods not exceeding in the whole thirty (30) days in each year as the Board may determine. |
REGISTER OF DIRECTORS AND OFFICERS
20. | REGISTER OF DIRECTORS AND OFFICERS |
The Company shall cause to be kept in one or more books at its Office a Register of Directors and Officers in which there shall be entered the full names and addresses of the Directors and Officers and such other particulars as required by the Law or as the Directors may determine. The Company shall from time to time notify to the said Registrar of any change that takes place in relation to such Directors and Officers as required by the Law.
TRANSMISSION OF SHARES
21. | TRANSMISSION OF SHARES |
21.1 | In the case of the death of a Shareholder, the survivor or survivors, where the deceased was a joint holder, and the estate representative where he was sole holder, shall be the only person recognised by the Company as having any title to his Equity Securities; but nothing herein contained shall release the estate of a deceased holder (whether the sole or joint) from any liability in respect of any Equity Security held by him solely or jointly with other persons. For the purpose of this Article, estate representative means the person to whom probate or letters of administration has or have been granted in Mauritius or, failing any such person, such other person as the Board may in its absolute discretion determine to be the person recognised by the Company for the purpose of this Article. |
21.2 | Any person becoming entitled to an Equity Security in consequence of the death of a Shareholder or otherwise by operation of applicable Law may, subject as hereafter provided and upon such evidence being produced as may from time to time be required by the Board as to his entitlement, either be registered himself as the holder of the Equity Security or elect to have some person nominated by him registered as the transferee thereof. If the person so becoming entitled elects to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have his nominee registered, he shall signify his election by signing an instrument of transfer of such Equity Securities in favour of his nominee. All the limitations, restrictions and provisions of this Constitution relating to the right to transfer and the registration of transfer of Equity Securities shall be applicable to any such notice or instrument of transfer as aforesaid as if the death of the Shareholder or other event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer signed by such Shareholder. |
21.3 | A person becoming entitled to an Equity Security in consequence of the death of a Shareholder or otherwise by operation of applicable Law shall (upon such evidence being produced as may |
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from time to time be required by the Board as to his entitlement) be entitled to receive and may give a discharge for any dividends or other monies payable in respect of the Equity Security, but he shall not be entitled in respect of the Equity Security to receive notices of or to attend or vote at Meetings of the Company or, save as aforesaid, to exercise in respect of the Equity Security, any of the rights or privileges of a Shareholder until he shall have become registered as the holder thereof. The Board may at any time give notice requiring such person to elect either to be registered himself or to transfer the Equity Security and, if the notice is not complied with within sixty (60) days, the Board may thereafter withhold payment of all dividends and other monies payable in respect of the Equity Securities until the requirements of the notice have been complied with.
21.4 | Subject to any directions of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under this Article. |
OFFICERS
22. | OFFICERS |
22.1 | The officers of the Company shall consist of the Chairman of the Board, the Directors and Secretary and such additional officers (who may or may not be Directors) as the Board may from time to time determine, all of whom shall be deemed to be officers for the purposes of the Law and this Constitution. |
22.2 | The Directors shall, as soon as may be after each appointment or election of Directors, elect amongst the Directors a chairman and if more than one Director is proposed for this office, the election to such office shall take place in such manner as the Directors may determine. |
22.3 | The officers shall receive such remuneration as the Directors may from time to time determine. |
22.4 | The Secretary and additional officers, if any, shall be appointed by the Board and shall hold office on such terms and for such period as the Board may determine. The Secretary shall be ordinarily resident in Mauritius. If thought fit, two or more persons may be appointed as joint Secretaries. The Board may also appoint from time to time on such terms as it thinks fit one or more assistant or deputy Secretaries. |
22.5 | The Secretary shall attend all meetings of the Shareholders and shall keep correct minutes of such meetings and enter the same in the proper books provided for the purpose. He shall perform such other duties as are prescribed by the Law or this Constitution or as may be prescribed by the Board. |
22.6 | The officers of the Company shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Directors from time to time. |
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22.7 | A provision of the Law or of this Constitution requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as or in place of the Secretary. |
MINUTES
23. | MINUTES |
23.1 | The Board shall cause minutes to be made and books kept for the purpose of recording: |
23.1.1 | all appointments of Officers made by the Board; |
23.1.2 | the names of the Directors and other persons (if any) present at each meeting of the Board and of any committee; and |
23.1.3 | all proceedings at meetings of the Company, of the holders of any class of Shares in the Company, of the Board and of committees appointed by the Board or the Shareholders. |
23.2 | Shareholders shall only be entitled to see the Register of Directors and Officers, the Register, financial information and the minutes of Meetings of the Shareholders of the Company. |
THE SEAL
24. | THE SEAL |
24.1 | The Board may authorise the production of a common seal of the Company and one or more duplicate common seals of the Company, which shall consist of a circular device with the name of the Company around the outer margin thereof and the country and year of registration in Mauritius across the centre thereof. |
24.2 | Any document required to be under seal or executed as a deed on behalf of the Company may be: |
24.2.1 | executed under the Seal in accordance with this Constitution; or |
24.2.2 | signed or executed by any person authorised by the Board for that purpose, without the use of the Seal. |
24.3 | The Board shall provide for the custody of every Seal. A Seal shall only be used by authority of the Board or of a committee constituted by the Board. Subject to this Constitution, any instrument to which a Seal is affixed shall be attested by the signature of: |
24.3.3 | a Director; or |
24.3.4 | the Secretary; or |
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24.3.5 | any one person authorised by the Board for that purpose. |
DIVIDENDS AND OTHER PAYMENTS
25. | DIVIDENDS AND OTHER PAYMENTS |
25.1 | Subject to the Law, Article 34 and the provisions of this Constitution, the Board may from time to time declare dividends to be paid to the Shareholders. |
25.2 | No distribution (which includes dividend) may be made by the Company unless that distribution has been authorised by the Board in accordance with this Constitution and the Shareholders Agreement. Dividends may only be declared and paid out of the retained earnings of the Company, after having made good any accumulated losses at the beginning of the accounting period and no distribution (which includes dividend) may be made unless the Board is satisfied that upon the distribution being made (a) the Company is able to pay its debts as they become due in the normal course of business, and (b) the value of the Companys assets is greater than the sum of (i) the value of its liabilities and (ii) the Companys stated capital. |
25.3 | The Board may deduct from any dividend, distribution or other monies payable to a Shareholder by the Company on or in respect of any Shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in respect of Equity Securities of the Company. |
25.4 | No dividend, distribution or other monies payable by the Company on or in respect of any Equity Security shall bear interest against the Company. |
25.5 | An Equity Security issued as a dividend by the Company shall be treated for all purposes as having been issued for money equal to the surplus that is transferred to capital upon the issue of the Equity Security. |
25.6 | A division of the issued and outstanding Equity Securities of a class or series of Equity Securities into a larger number of Equity Securities of the same class or series having a proportionately smaller par value does not constitute a dividend of Equity Securities. |
25.7 | Any dividend, distribution or interest, or part thereof payable in cash, or any other sum payable in cash to the holder of Equity Securities may be paid by wire transfer to the account designated by the Shareholder or by cheque or postal or money order sent through the post or by courier addressed to the holder at his address in the Register or, in the case of joint holders, addressed to the holder whose name stands first in the Register in respect of the Equity Securities at his registered address as appearing in the Register or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque, postal, money order or wire transfer shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first in the Register in respect of such Equity Securities, and |
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shall be sent at his or their risk and payment of the cheque, postal, money order or wire transfer by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two (2) or more joint holders may give effectual receipts for any dividends, distributions or other monies payable or property distributable in respect of the Equity Securities held by such joint holders.
25.8 | Any dividend or distribution out of retained earnings unclaimed for a period of six (6) years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to the Company and the payment by the Board of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the Equity Securities into a separate account shall not constitute the Company a trustee in respect thereof. |
25.9 | The Board may also, in addition to its other powers, direct payment or satisfaction of any dividend or distribution out of retained earnings wholly or in part by the distribution of specific assets, and in particular of paid-up Equity Securities or debentures of any other company, and where any difficulty arises in regard to such distribution or dividend, the Board may settle it as it thinks expedient, and in particular, may authorise any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution or dividend purposes of any such specific assets and may determine that cash payments shall be made to any Shareholders upon the footing of the values so fixed in order to secure equality of distribution and may vest any such specific assets in trustees as may seem expedient to the Board, provided that such dividend or distribution may not be satisfied by the distribution of any partly paid Equity Securities or debentures of any company without the sanction of an Ordinary Resolution. |
26. | RESERVES |
The Board may, before declaring any dividend or distribution out of retained earnings, set aside such sums as it thinks proper as reserves which shall, at the discretion of the Board, be applicable for any purpose of the Company and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time think fit. The Board may also without placing the same to reserve carry forward any sums which it may think it prudent not to distribute.
RECORD DATES
27. | RECORD DATES |
Subject to the provisions of this Constitution and the Shareholders Agreement, the Company may by Ordinary Resolution or the Board may fix any date as the record date for any dividend, distribution, allotment or issue and for the purpose of identifying the persons entitled to receive notices of any Meeting and to vote at any Meeting. Any such record date may be on or at any time before or after any date on which such dividend, distribution, allotment or issue is declared, paid or made or such notice is despatched.
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ACCOUNTING RECORDS
28. | ACCOUNTING RECORDS |
28.1 | The Board shall cause to be kept accounting records sufficient to give a true and fair view of the state of the Companys affairs and to show and explain its transactions, in accordance with the Act. |
28.2 | The records of account shall be kept at the Registered Office or at such other place or places as the Board thinks fit, and shall at all times be open to inspection by the Directors, provided that if the records of account are kept at some place outside Mauritius, there shall be kept at an office of the Company in Mauritius such records as will enable the Directors to ascertain with reasonable accuracy the financial position of the Company at the end of each three (3) month period. |
28.3 | A copy of every balance sheet and statement of income and expenditure, including every document required by Law to be annexed thereto, which is to be laid before the Company in Meeting, together with a copy of the auditors report (if applicable), shall be sent to each person entitled thereto in accordance with the requirements of the Act. |
SERVICE OF NOTICES AND OTHER DOCUMENTS
29. | SERVICE OF NOTICES AND OTHER DOCUMENTS |
29.1 | Any notice and other communications provided for in this Constitution shall be in writing and shall be first transmitted by facsimile transmission and then confirmed by postage, prepaid registered post with acknowledgement due or by internationally recognized courier service, in the manner as elected by the Party giving such notice. |
29.2 | All notices shall be deemed to have been validly given (i) immediately, upon receipt of the confirmation report, if transmitted by facsimile transmission, or (ii) 7 (seven) days after posting if sent by registered post, or (iii) 4 (four) days from the date of dispatch, if sent by courier. |
29.3 | Any Party may, from time to time, change its address, facsimile number or representative for receipt of notices by giving to the other not less than 15 (fifteen) Business Days prior written notice. |
AMALGAMATION
30. | AMALGAMATION |
Any resolution proposed for consideration at any Meeting to approve the amalgamation of the Company with any other company, wherever incorporated, shall be approved by Special Resolution or in accordance with Article 34 if a higher percentage than 75 per cent of the votes of those Shareholders entitled to vote is required.
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CONTINUATION
31. | CONTINUATION |
31.1 | Subject to the Act, the Shareholders Agreement and Article 34, the Board may, with the sanction of a Special Resolution, approve the discontinuation of the Company in Mauritius and the continuation of the Company in a jurisdiction outside Mauritius. The Board, having resolved to approve the discontinuation of the Company, may, with the sanction of a Special Resolution, subsequently resolve not to proceed with any application to discontinue the Company in Mauritius or may vary such application as it sees fit. |
31.2 | In case of transfer of registration of the Company to another jurisdiction, the procedure set out under the Act shall be followed. |
CONFLICTS WITH THE SHAREHOLDERS AGREEMENT
32. | CONFLICTS WITH THE SHAREHOLDERS AGREEMENT |
32.1 | In case of any conflict between the provisions of this Constitution and the Shareholders Agreement, the provisions of the Shareholders Agreement shall prevail and the Shareholders shall cause this Constitution to be amended, subject always to the mandatory provisions of the Act. |
ALTERATION OF CONSTITUTION
33. | ALTERATION OF CONSTITUTION |
Subject to the applicable Law, this Constitution may be amended from time to time by the Company in accordance with Article 34.
INVESTORS CONSENT RIGHTS
34. | INVESTORS CONSENT RIGHTS |
34.1 | The following corporate actions by the Company or any of its Subsidiaries, including AZI shall require the consent of all Investors: |
(a) | amendment to the Constitution or Memorandum and Articles (as applicable) of the Company or any Subsidiary in: (a) in any material manner; or (b) in any way which may alter or change the rights, privileges or preferences of the Equity Securities held by the Investors; |
(b) | change in the designations, powers, rights, preferences or privileges, or the qualifications, limitations or restrictions on Equity Securities held by the Investors; |
(c) | creation, authorization or issuance of any Equity Shares in the capital of the Company, or Share Equivalents in the Company whether having a structural or legal preference over, or ranking pari passu with, the Equity Securities held by the |
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Investors;
(d) | authorize or undertake any arrangement for the disposal of any shares of any Subsidiary that results in the Company owning (directly or indirectly) less than 100% (one hundred per cent) of any Subsidiary; |
(e) | any amalgamation, merger, consolidation, reconstitution, restructuring or similar transaction that results in a change in control of the Company or any Subsidiary; |
(f) | any sale or disposal of Assets for a cumulative amount of USD 5,000,000 (United States Dollar Five Million) or more within a consecutive period of twelve (12) months (other than pursuant to charge(s) on Assets created for securing borrowing(s) approved by Majority Investors under Article 34.2 (i)); |
(g) | any sale or disposal of Assets of value more than USD 5,000,000 (United States Dollar Five Million) (other than pursuant to charge(s) on Assets created for securing borrowing(s) approved by Majority Investors under Article 34.2 (i)); |
(h) | authorize or undertake any Liquidation Event A or Liquidation Event B with respect to the Company or any of its Subsidiaries; |
(i) | authorize or undertake any listing, including a QIPO, other than any offering, any delisting of the Equity Securities of the Company or any Subsidiary, or creating any new Subsidiary; |
(j) | authorize or undertake any reduction of capital or share repurchase, other than any buyback by the Company under Article 9 and 9A, repurchase of Equity Securities issued to or held by Employees, officers, directors or consultants of the Company or its Subsidiaries pursuant to an employee stock plan approved by the Board of the Company; |
(k) | any change to the Business or to the business of Company or any of its Subsidiaries; |
(l) | any change in the number of Directors of the Board other than as provided in this Constitution or any change to the committees of the Board, other than as provided in this Constitution; |
(m) | giving of any guarantee or comfort letter by the Company or any Subsidiary to any Person that is not in relation to securing project finance, working capital limits or non-fund based facilities availed for solar power projects of the Company or any Subsidiary; |
(n) | declaring any dividend or making any other distribution to Shareholders other than as provided in Constitution or the Shareholders Agreement; |
(o) | entry into, amendment or termination of any agreement or commitment which imposes or is likely to impose obligations on the Company or its Subsidiary to make payments or otherwise incur liabilities exceeding the budget approved by the Board except automatic authorization to the CEO in accordance Article 34.2 (a); |
(p) | Transfer of the Equity Securities held by any Shareholder, otherwise than in the manner permitted by the Transaction Documents; |
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(q) | appointment or removal of the statutory auditors or internal auditors of the Company or AZI; |
(r) | amendments to any ESOP plan approved by the Company in accordance with the terms of this Constitution; |
(s) | changes to accounting or tax compliance policies or practices; |
(t) | constituting a committee of the Board or delegation of the powers of the Board to any committee or sub-committee; |
(u) | incurring any single item of capital expenditure (including acquiring a business or asset) greater than INR 10,000,000 (Indian RupeesTen Million); |
(v) | any change, amendment, modification or waiver of the terms of the AZI Shareholders Agreement; |
(w) | authorizing, undertaking, creating, approving or effecting any changes in the share capital of AZI by any means, including whether by issue, transfer, re-organization, reduction, buy-back, disposal or change in terms and privileges of equity shares or any equity securities issued by AZI; and |
(x) | any commitment or agreement or delegation of powers to do any of the foregoing. |
34.2 | The following corporate actions of the Company or any of its Subsidiaries, including AZI shall require the consent of Majority Investors and/or Super-Majority Investors, as applicable: |
(a) | approving or amending of the Annual Business Plan and Budget with automatic authorization to the CEO to exceed expenditure by a maximum of 10% (ten per cent); |
(b) | establishment of a new power plant or entering into a new power purchase agreement or amendment to any existing power purchase agreement entered into by the Company or its Subsidiaries, except where the amendment has no material implications, including on tariff, termination, security package such as, but not limited to, letter of consent/default escrow agreements, parties and duration of the power purchase agreement, other than where such establishment of new power plant or entering into a new power purchase agreement or amendment to any existing power purchase agreement has already been covered under the approved Annual Business Plan of the Company or its Subsidiaries, as the case may be; |
(c) | redeeming or buying back shares upon termination of a restricted stock purchase agreement of an officer, Employee or Director or consultant and buying back unvested shares held by the Sponsors and Employees of the Company; |
(d) | appointment or removal and determination of the terms of employment (including remuneration) of Key Managerial Personnel; |
(e) | giving any loans to the Key Managerial Personnel and Directors; |
(f) |
giving of any guarantee or comfort letter by the Company or any Subsidiary to any |
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Person that is in relation to securing project finance, working capital limits or non-fund based facilities availed for solar power projects of the Company or any Subsidiary; |
(g) | approval or any employee or consultant stock option; |
(h) | changes in the Financial Year for preparation of audited accounts; |
(i) | borrowing in excess of INR 5,000,000 (Indian Rupees Five Million) and/or creating any charge on Assets for securing such borrowings; |
(j) | any sale of all or substantially all the IP Rights of the Company or its Subsidiary; |
(k) | entering into or varying any material contracts; |
(l) | changing the status of the Company or its Subsidiaries from a private company to a public company or vice a versa, as applicable; |
(m) | entering into any agreement, arrangement or transaction with any Shareholder or Director or Sponsors and/or their Affiliates, other than non-material agreements having a term of less than one (1) year that are negotiated on an arms-length basis in the ordinary course of business and contemplated by the Annual Business Plan and Budget; and |
(n) | any commitment or agreement or delegation of powers to do any of the foregoing. |
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DECLARATION BY APPLICANT
SIGNATORIES
I, the undersigned hereby certify that |
) | |||||||
this document is the constitution of the |
) |
|||||||
Company |
) |
|||||||
By: | /s/ Yung Oy Pin Lun Leung | |||||||
Name: | AAA Global Services Ltd | |||||||
Company Secretary | ||||||||
Represented by | ||||||||
Yung Oy Pin Lun Leung |
This document is made in three originals.
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Exhibit 3.2
A PUBLIC COMPANY LIMITED BY SHARES
HOLDING A CATEGORY 1 GLOBAL BUSINESS
LICENCE
CONSTITUTION
OF
AZURE POWER GLOBAL LIMITED
(Adopted pursuant to a special resolution by way of written
resolutions passed by the shareholders of the Company on []
2016 and effective immediately upon the completion of the
Companys initial public offering of equity shares on [] 2016)
I N D E X
1. |
GENERAL | 1 | ||||
2. |
INTERPRETATION | 1 | ||||
3. |
SHARE CAPITAL | 4 | ||||
4. |
ALTERATION OF CAPITAL | 4 | ||||
5. |
SHARE RIGHTS | 6 | ||||
6. |
VARIATION OF RIGHTS | 6 | ||||
7. |
SHARES | 7 | ||||
8. |
SHARE CERTIFICATES | 7 | ||||
9. |
LIEN | 9 | ||||
10. |
CALLS ON SHARES | 9 | ||||
11. |
FORFEITURE OF SHARES | 10 | ||||
12. |
REGISTER OF MEMBERS | 12 | ||||
13. |
RECORD DATES | 12 | ||||
14. |
TRANSFER OF SHARES | 12 | ||||
15. |
TRANSMISSION OF SHARES | 13 | ||||
16. |
UNTRACEABLE MEMBERS | 13 | ||||
17. |
MEMBERS MEETINGS | 14 | ||||
18. |
NOTICE OF MEMBERS MEETINGS | 14 | ||||
19. |
PROCEEDINGS AT MEMBERS MEETINGS | 15 | ||||
20. |
VOTING | 16 | ||||
21. |
PROXIES AND POSTAL VOTES | 18 | ||||
22. |
CORPORATIONS ACTING BY REPRESENTATIVES | 20 | ||||
23. |
WRITTEN RESOLUTIONS OF MEMBERS | 21 | ||||
24. |
BOARD OF DIRECTORS | 21 | ||||
25. |
RETIREMENT OF DIRECTORS | 22 | ||||
26. |
DISQUALIFICATION OF DIRECTORS | 23 | ||||
27. |
EXECUTIVE DIRECTORS | 23 | ||||
28. |
ALTERNATE DIRECTORS | 24 | ||||
29. |
DIRECTORS FEES AND EXPENSES | 25 | ||||
30. |
DIRECTORS INTERESTS | 25 | ||||
31. |
GENERAL POWERS OF THE DIRECTORS | 26 | ||||
32. |
BORROWING POWERS | 28 | ||||
33. |
PROCEEDINGS OF THE DIRECTORS | 28 | ||||
34. |
AUDIT COMMITTEE | 30 | ||||
35. |
OFFICERS | 30 | ||||
36. |
REGISTER OF DIRECTORS AND OFFICERS | 31 | ||||
37. |
MINUTES | 31 | ||||
38. |
SEAL | 31 | ||||
39. |
AUTHENTICATION OF DOCUMENTS | 32 | ||||
40. |
DESTRUCTION OF DOCUMENTS | 32 | ||||
41. |
DIVIDENDS AND OTHER PAYMENTS | 33 | ||||
42. |
RESERVES | 37 | ||||
43. |
CAPITALISATION | 37 | ||||
44. |
ACCOUNTING RECORDS | 38 | ||||
45. |
AUDIT | 38 | ||||
46. |
NOTICES | 39 | ||||
47. |
SIGNATURES | 41 | ||||
48. |
WINDING UP | 41 | ||||
49. |
INDEMNITY | 41 |
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50. |
AMENDMENT TO CONSTITUTION AND NAME OF COMPANY | 42 | ||||
51. |
INFORMATION | 42 | ||||
52. |
NOTIFICATION OF SHAREHOLDING | 42 | ||||
53. |
ADDITIONAL RESTRICTIONS | 43 |
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1. | GENERAL |
1.1 | Constitution and the Companies Act 2001 |
The provisions of the Act are modified, adopted and extended by this Constitution as hereinafter provided.
1.2 | Name |
The name of the Company is Azure Power Global Limited.
1.3 | Objects |
1.3.1 | The objects of the Company are to carry out any business or activity permitted under its Category 1 Global Business Licence. To the extent permitted by Law, the Company may effect any business transactions and take any steps which it considers expedient to further the objects of the Company. |
1.3.2 | The Company shall have full capacity to carry on or undertake any business or activity, do any act or enter into any transaction, subject to such restrictions and limitations as may be provided under any conditions of its Category 1 Global Business Licence. |
1.3.3 | The Company shall have for the purposes of Clause 1.3.2 above, full rights, powers and privileges. |
1.4 | Type of Company and Liability of Shareholders |
1.4.1 | The Company is a public company limited by shares. |
1.4.2 | The liability of the Members is limited to any amount unpaid on their shares and to such obligations as may be attached to their shares under the terms of their issue or this Constitution. |
1.5 | Registered Office |
The Office of the Company will be at c/o AAA Global Services Ltd., 1st Floor, The Exchange 18 Cybercity, Ebene, Mauritius, or at such other place within Mauritius as the Board may, from time to time, determine.
2. | INTERPRETATION |
2.1 | In this Constitution, unless the context otherwise requires, the words standing in the first column of the following table shall bear the meaning set opposite them respectively in the second column. |
WORD |
MEANING |
|
Act | the Companies Act 2001 of Mauritius or any statutory modification, amendment or re-enactment thereof for the time being in force, and any reference to any provision of the Act is to that provision as so modified, amended or re-enacted or contained in any such subsequent act or acts. | |
Audit Committee | the audit committee of the Company formed by the Board pursuant to Clause 34 hereof, or any successor audit committee. | |
Auditor | the auditor of the Company for the time being and may include any individual or partnership. |
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Shareholders Agreement | the shareholders agreement dated July 22, 2015 by and among the Company, International Finance Corpooration, Helion Venture Partners II, LLC, Helion Venture Partners India II, LLC, FC VI India Venture (Mauritius) Ltd., DEG Deutsche Investitions-Und Entwicklungsgesellschaft Mbh, Societe de Promotion et de Participation pour La Cooperation Economique S.A., IFC GIF Investment Company I, IW Green Inc., Mr. Inderpreet Singh Wadhwa and Mr. Harkanwal Singh Wadhwa, as may be amended from time to time. | |
Board or Directors | the board of directors for the time being of the Company and acting by resolution in accordance with the Act and this Constitution or the directors present at a meeting of directors at which there is a quorum. | |
business day | means each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in Mauritius or the State of New York are generally authorized or obligated by law or executive order to close. | |
capital | the share capital from time to time of the Company. | |
Category 1 Global Business Licence | a licence issued under section 72(6) of the Financial Services Act 2007. | |
Clause | a clause of this Constitution. | |
clear days | in relation to the period of a notice, that period excluding the day when the notice is given or deemed to be given and the day for which it is given or on which it is to take effect. | |
clearing house | a clearing house recognised by the laws of the jurisdiction in which the shares of the Company (or depositary receipts therefor) are listed or quoted on a stock exchange or interdealer quotation system in such jurisdiction. | |
Company | Azure Power Global Limited | |
competent regulatory authority | a competent regulatory authority in the territory where the shares of the Company (or depositary receipts therefor) are listed or quoted on a stock exchange or interdealer quotation system in such territory. | |
Constitution | this Constitution in its present form or as supplemented or amended or substituted from time to time. | |
debenture and debenture holder | include debenture stock and debenture stockholder respectively. | |
depository | a depository or other recognised securities clearing system or clearing house or its nominee(s) in the jurisdiction where the shares of the Company (or depositary receipts therefor) are listed or quoted on a Designated Stock Exchange in such jurisdiction, which shall include the Depository Trust Company or its nominee(s) in the United States of America. | |
Designated Stock Exchange | the New York Stock Exchange or any other internationally recognized stock exchange where the Companys securities are traded | |
Directors | the directors for the time being of the Company and shall include an alternate director. | |
dollars, $ and US$ | dollars, the legal currency of the United States of America. | |
head office | such office of the Company as the Directors may from time to time determine to be the principal office of the Company. |
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Law | the laws of Mauritius, including (without limitation) the Act and any other act or regulation for the time being in force concerning public companies limited by shares registered in Mauritius and affecting the Company. | |
Listed Shares | shares of the Company which have been admitted for quotation on a Designated Stock Exchange for so long as any shares of the Company are listed or quoted on such Designated Stock Exchange. | |
Mauritius | the Republic of Mauritius. | |
Member | a duly registered holder from time to time of the shares in the capital of the Company. | |
month | a calendar month. | |
Notice | written notice unless otherwise specifically stated and as further defined in this Constitution. | |
Office | the registered office of the Company for the time being. | |
ordinary resolution | a resolution that is approved by a simple majority of the votes of those Members entitled to vote and voting on the matter which is the subject of the resolution. | |
paid up | paid up or credited as paid up. | |
Register | the principal register of Members and where applicable, any branch register of Members of the Company to be maintained at such place within or outside Mauritius as the Board shall determine from time to time. | |
Registration Office | in respect of any class of share capital such place as the Board may from time to time determine to keep a branch register of Members in respect of that class of share capital and where (except in cases where the Board otherwise directs) the transfers or other documents of title for such class of share capital are to be lodged for registration and are to be registered. | |
SEC | the United States Securities and Exchange Commission. | |
Seal | common seal or any one or more duplicate seals of the Company (including a securities seal, if any) for use in Mauritius or in any place outside Mauritius. | |
Secretary or Company Secretary | any person, firm or corporation appointed by the Board to perform any of the duties of secretary of the Company and includes any assistant, deputy, temporary or acting secretary. | |
special resolution | a resolution approved by a majority of 75 per cent. (75%) or, if a higher majority is required by this Constitution, that higher majority, of the votes of those Members entitled to vote and voting on the question. | |
Statutes | the Act and every other law of the Legislature of Mauritius for the time being in force applying to or affecting the Company and/or this Constitution. | |
Treasury Share | a share of the Company that was or is treated as having been acquired and held by the Company and has been held continuously by the Company since it was so acquired and has not been cancelled. | |
year | a calendar year. |
2.2 | In this Constitution, unless there be something within the subject or context inconsistent with such construction: |
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2.2.1 | words importing the singular include the plural and vice versa; |
2.2.2 | words importing a gender include both gender and the neuter; |
2.2.3 | words importing persons include companies, associations and bodies of persons whether corporate or not; |
2.2.4 | the words: |
(a) | may shall be construed as permissive; |
(b) | shall or will shall be construed as imperative; |
2.2.5 | expressions referring to writing shall, unless the contrary intention appears, be construed as including printing, lithography, photography and other modes of representing words or figures in a visible form, and including where the representation takes the form of electronic display, provided that both the mode of service of the relevant document or notice and the Members election comply with all applicable Statutes, rules and regulations; |
2.2.6 | references to any law, ordinance, statute or statutory provision shall be interpreted as relating to any statutory modification or re-enactment thereof for the time being in force; |
2.2.7 | save as aforesaid words and expressions defined in the Statutes shall bear the same meanings in this Constitution if not inconsistent with the subject in the context; |
2.2.8 | references to a document being executed include references to it being executed under hand or under seal or by electronic signature or by any other method and references to a notice or document include a notice or document recorded or stored in any digital, electronic, electrical, magnetic or other retrievable form or medium and information in visible form whether having physical substance or not; and |
2.2.9 | a special resolution shall be effective for any purpose for which an ordinary resolution is expressed to be required under any provision of this Constitution or the Statutes. |
3. | SHARE CAPITAL |
3.1 | The stated capital of the Company at the date on which this Constitution comes into effect shall be divided into equity shares of a par value of US$0.01 each. |
3.2 | The Company may purchase or otherwise acquire its own shares for cancellation or hold shares purchased or acquired by the Company as Treasury Shares pursuant to a special resolution in accordance with the Act on such terms as the Board shall think fit. Subject to the Law, this Constitution and, where applicable, the rules of the Designated Stock Exchange and/or any competent regulatory authority, any power of the Company to purchase or otherwise acquire its own shares shall be exercisable by the Board in such manner, upon such terms and subject to such conditions as it may from time to time think fit. The Company may transfer any Treasury Shares purchased or acquired by it pursuant to the Act. |
4. | ALTERATION OF CAPITAL |
4.1 | The Company may from time to time by ordinary resolution in accordance with the Law: |
4.1.1 | increase its capital by such sum, to be divided into shares of such classes and amounts, as the resolution shall prescribe; |
4.1.2 | consolidate and divide all or any of its capital into shares of larger par value than its existing shares; |
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4.1.3 | divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares attach thereto respectively any preferential, deferred, qualified or special rights, privileges, conditions or such restrictions which in the absence of any such determination by the Company in Members meeting, as the Directors may determine provided always that where the Company issues shares which do not carry voting rights, the words non-voting shall appear in the designation of such shares and where the equity capital includes shares with different voting rights, the designation of each class of shares, other than those with the most favourable voting rights, must include the words restricted voting or limited voting; |
4.1.4 | sub-divide its shares, or any of them, into shares of a smaller amount than is fixed by this Constitution (subject, nevertheless, to the Law), and may by such resolution determine that, as between the holders of the shares resulting from such sub-division, one or more of the shares may have any such preferred, deferred or other rights or be subject to any such restrictions as compared with the other or others as the Company has power to attach to new shares; or |
4.1.5 | cancel any shares which, at the date of the passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled in accordance with the Act or, in the case of shares without par value, diminish the number of shares into which its capital is divided. |
4.2 | The Board may settle as it considers expedient any difficulty which arises in relation to any consolidation and division under the last preceding Clause 4.1 and in particular but without prejudice to the generality of the foregoing may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale (after deduction of the expenses of such sale) in due proportion amongst the Members who would have been entitled to the fractions, and for this purpose the Board may authorise some person to transfer the shares representing fractions to their purchaser or resolve that such net proceeds be paid to the Company for the Companys benefit. Such purchaser will not be bound to see to the application of the purchase money nor will his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale. |
4.3 | The Company may from time to time by special resolution, subject to any confirmation or consent required by the Law: |
4.3.1 | reduce its share capital or any capital redemption reserve in any manner permitted by law; or |
4.3.2 | change the currency denomination of its share capital. |
4.4 |
Subject to clause 21.4(b) of the Shareholders Agreement, the Board is expressly authorized to provide for the issuance of all or any shares of the preferred stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such class or series, including, without limitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the |
5
dissolution of, or upon any distribution of the assets of, the Company; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Company at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such resolution or resolutions.
4.5 | Except so far as otherwise provided by the conditions of issue, or by this Constitution, any capital raised by the creation of new shares shall be treated as if it formed part of the original capital of the Company, and such shares shall be subject to the provisions contained in this Constitution with reference to the payment of calls and instalments, transfer and transmission, forfeiture, lien, cancellation, surrender, voting and otherwise. |
5. | SHARE RIGHTS |
5.1 | Subject to the provisions of the Law, the rules of the Designated Stock Exchange and this Constitution and to any special rights conferred on the holders of any shares or class of shares, any share in the Company (whether forming part of the present capital or not) may be issued with or have attached thereto such rights or restrictions whether in regard to dividend, voting, return of capital or otherwise as the Company may determine or, if there has not been any such determination or so far as the same shall not make specific provision, as the Board may determine. |
5.2 | Subject to the Law, any preferred shares may be issued or converted into shares that, at a determinable date or at the option of the Company or the holder if so authorised by its constitution, are liable to be redeemed on such terms and in such manner as the Company may by ordinary resolution of the Members or the Board before the issue or conversion may determine. |
6. | VARIATION OF RIGHTS |
6.1 | Notwithstanding anything to the contrary, all or any of the special rights for the time being attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, from time to time (whether or not the Company is being wound up) be varied, modified or abrogated with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. To every such separate Members meeting all the provisions of this Constitution relating to Members meetings of the Company shall, mutatis mutandis, apply, but so that: |
6.1.1 | the necessary quorum (whether at a separate Members meeting or at its adjourned meeting) shall be a person or persons (or in the case of a Member being a corporation, its duly authorized representative) together holding or representing by proxy not less than one-third in nominal value of the issued shares of that class; |
6.1.2 | every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him; and |
6.1.3 | any holder of shares of the class present in person or by proxy or authorised representative may demand a poll. |
6.2 | Subject to the Act, the special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied, modified or abrogated by the creation or issue of further shares ranking pari passu therewith. |
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7. | SHARES |
7.1 | 7.1.1 Subject to the Law, the provisions of this Constitution and, where applicable, the rules of the Designated Stock Exchange and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, the Board may offer, issue, grant options over or otherwise dispose of shares of the Company to such persons, at such times and for such consideration and upon such terms and conditions as the Board may in its absolute discretion determine but so that no shares shall be issued at a discount. |
7.1.2 | Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to Members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the Board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever. |
7.1.3 | The Board may issue options, warrants or convertible securities or securities of similar nature conferring the right upon the holders thereof to subscribe for, purchase or receive any class of shares or securities in the capital of the Company on such terms as it may from time to time determine. |
7.2 | The Company may in connection with the issue of any shares exercise all powers of paying commission and brokerage conferred or permitted by the Law. Subject to the Law, the commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one and partly in the other. |
7.3 | Except as required by law, no person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or required in any way to recognise (even when having notice thereof) any equitable, contingent, future or partial interest in any share or any fractional part of a share or (except only as otherwise provided by this Constitution or by law) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder. |
7.4 | Subject to the Law and this Constitution, the Board may at any time after the allotment of shares but before any person has been entered in the Register as the holder, recognise a renunciation thereof by the allottee in favour of some other person and may accord to any allottee of a share a right to effect such renunciation upon and subject to such terms and conditions as the Board considers fit to impose. |
8. | SHARE CERTIFICATES |
8.1 | 8.1.1 For so long as any shares of the Company are listed on a Designated Stock Exchange, the Company may issue Listed Shares in uncertificated form where authorized by a resolution of the Board. Notwithstanding anything contained in this Constitution, no share certificates shall be issued in respect of Listed Shares and the Company shall not be bound to issue any share certificate in respect of any Listed Shares to the holders thereof. |
8.1.2 | For so long as the shares of the Company are listed on a Designated Stock Exchange, the Company may and is expressly authorized to convert certificated shares into uncertificated shares where such conversion is authorized by a resolution of the Board. |
8.1.3 |
Every share certificate shall be issued under the Seal or a facsimile thereof or bearing the signature (or a facsimile thereof) of a Director or the Secretary or a person expressly authorised to sign and shall specify the number and class and distinguishing |
7
numbers (if any) of the shares to which it relates, and the amount paid up thereon and may otherwise be in such form as the Directors may from time to time determine. No certificate shall be issued representing shares of more than one class. The Board may by resolution determine, either generally or in any particular case or cases, that any signatures on any such certificates (or certificates in respect of other securities) need not be autographic but may be affixed to such certificates by some mechanical means or may be printed thereon.
8.2 | 8.2.1 In the case of a share (not being a Listed Share) held jointly by several persons, the Company shall not be bound to issue more than one certificate therefor and delivery of a certificate to one of several joint holders shall be sufficient delivery to all such holders. |
8.2.2 | Where a share stands in the names of two or more persons, the person first named in the Register shall as regards service of notices and, subject to the provisions of this Constitution, all or any other matters connected with the Company, except the transfer of the shares, be deemed the sole holder thereof. |
8.3 | Other than a holder of Listed Shares or a Listed Share, every person whose name is entered, upon an allotment of shares, as a Member in the Register shall be entitled, without payment, to receive one certificate for all such shares of any one class or several certificates each for one or more of such shares of such class upon payment for every certificate after the first of such reasonable out-of-pocket expenses as the Board from time to time determines. |
8.4 | Save in respect of Listed Shares, share certificates shall be issued within the relevant time limit as prescribed by the Law or as the Designated Stock Exchange may from time to time determine, whichever is the shorter, after allotment or, except in the case of a transfer which the Company is for the time being entitled to refuse to register and does not register, after lodgment of a transfer with the Company. |
8.5 | 8.5.1 Upon every transfer of shares (not being Listed Shares), the certificate held by the transferor shall be given up to be cancelled, and shall forthwith be cancelled accordingly, and a new certificate shall be issued to the transferee in respect of the shares (not being Listed Shares) transferred to him at such fee as is provided in Clause 8.5.2). Where a Member transfers part only of the shares (not being Listed Shares) comprised in a certificate or where a Member requires the Company to cancel any certificate or certificates and issue new certificates for the purpose of subdividing his holding in a different manner, the old certificate or certificates shall be cancelled and a new certificate or certificates for the balance of such shares be issued in lieu thereof and such Member shall pay all or any part of the stamp duty payable (if any) on each share certificate prior to the delivery thereof which the Board in its absolute discretion may require and such fee as is provided in Clause 8.5.2). |
8.5.2 | The fee referred to in Clause 8.5.1 above shall be an amount not exceeding the relevant maximum amount as the Designated Stock Exchange may from time to time determine provided that the Board may at any time determine a lower amount for such fee. |
8.6 | If a share certificate shall be damaged or defaced or alleged to have been lost, stolen or destroyed, a new duplicate certificate representing the same shares (not being Listed Shares) may be issued to the relevant Member upon request and on payment of such fee as may be prescribed by the Act and, subject to compliance with such terms (if any) as to evidence and indemnity and to payment of the costs and reasonable out-of-pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board may think fit and, in case of damage or defacement, on delivery of the old certificate to the Company. |
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9. | LIEN |
9.1 | The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys (whether presently payable or not) called or payable at a fixed time in respect of that share. The Company shall also have a first and paramount lien on every share (not being a fully paid share) registered in the name of a Member (whether or not jointly with other Members) for all amounts of money presently payable by such Member or his estate to the Company whether the same shall have been incurred before or after notice to the Company of any equitable or other interest of any person other than such member, and whether the period for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Member or his estate and any other person, whether a Member of the Company or not. The Companys lien on a share shall extend to all dividends or other moneys payable thereon or in respect thereof. The Board may at any time, generally or in any particular case, waive any lien that has arisen or declare any share exempt in whole or in part, from the provisions of this Clause 9. |
9.2 | Subject to this Constitution, the Company may sell in such manner as the Board determines any share on which the Company has a lien, but no sale shall be made unless: (a) a sum in respect of which the lien exists is presently payable; and (b) until the expiry of 14 days after a written notice, stating and demanding payment of such part of the amount in respect of which the privilege or lien exists as is presently payable, has been given to the registered holder for the time being of the share, or the person entitled to the share by reason of the death or bankruptcy of the registered holder. |
9.3 | The net proceeds of the sale shall be received by the Company and applied in or towards payment or discharge of the debt or liability in respect of which the lien exists, so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the person entitled to the share at the time of the sale. To give effect to any such sale the Board may authorise some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares so transferred and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale. |
10. | CALLS ON SHARES |
10.1 | Subject to the provisions of this Constitution and to the terms of allotment, the Board may from time to time make calls upon the Members in respect of any moneys unpaid on their shares (whether on account of the nominal value of the shares or by way of premium), and each Member shall (subject to being given at least fourteen (14) clear days Notice specifying the time and place of payment) pay to the Company as required by such notice the amount called on his shares. A call may be extended, postponed or revoked in whole or in part as the Board in its sole discretion shall determine. |
10.2 | A call shall be deemed to have been made at the time when the resolution of the Board authorising the call was passed and may be made payable either in one lump sum or by instalments. |
10.3 | A person upon whom a call is made shall remain liable for calls made upon him notwithstanding the subsequent transfer of the shares in respect of which the call was made. The joint holders of a share shall be jointly and severally liable to pay all calls and instalments due in respect thereof or other moneys due in respect thereof. |
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10.4 | If a sum called in respect of a share is not paid before or on the day appointed for payment thereof, the person from whom the sum is due shall pay interest on the amount unpaid from the day appointed for payment thereof to the time of actual payment at such rate (not exceeding twenty per cent. (20%) per annum) as the Board may determine, but the Board may in its absolute discretion waive payment of such interest wholly or in part. |
10.5 | No Member shall be entitled to receive any dividend or bonus or to be present and vote (save as proxy for another Member) at any meeting of the Members either personally or by proxy, or be reckoned in a quorum, or exercise any other privilege as a Member until all calls or instalments due by him to the Company, whether alone or jointly with any other person, together with interest and expenses (if any) shall have been paid. |
10.6 | On the trial or hearing of any action or other proceedings for the recovery of any money due for any call, it shall be sufficient to prove that the name of the Member sued is entered in the Register as the holder, or one of the holders, of the shares in respect of which such debt accrued, that the resolution making the call is duly recorded in the minute book, and that notice of such call was duly given to the Member sued, in pursuance of this Clause 10; and it shall not be necessary to prove the appointment of the Directors who made such call, nor any other matters whatsoever, but the proof of the matters aforesaid shall be conclusive evidence of the debt. |
10.7 | Any amount payable in respect of a share upon allotment or at any fixed date, whether in respect of nominal value or premium or as an instalment of a call, shall be deemed to be a call duly made and payable on the date fixed for payment and if it is not paid, the provisions of this Clause 10 shall apply as if that amount had become due and payable by virtue of a call duly made and notified. |
10.8 | On the issue of shares the Board may differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment. |
10.9 | The Board may, if it thinks fit, receive from any Member willing to advance the same, and either in money or moneys worth, all or any part of the moneys uncalled and unpaid or instalments payable upon any shares held by him and upon all or any of the moneys so advanced (until the same would, but for such advance, become presently payable) pay interest at such rate (if any) as the Board may decide. The Board may at any time repay the amount so advanced upon giving to such Member not less than one months Notice of its intention in that behalf, unless before the expiration of such notice the amount so advanced shall have been called up on the shares in respect of which it was advanced. Such payment in advance shall not entitle the holder of such share or shares to participate in respect thereof in a dividend subsequently declared. |
11. | FORFEITURE OF SHARES |
11.1 | 11.1.1 If a call remains unpaid after it has become due and payable the Board may give to the person from whom it is due not less than fourteen (14) clear days Notice: |
(a) | requiring payment of the amount unpaid together with any interest which may have accrued and which may still accrue up to the date of actual payment; and |
(b) | stating that if the Notice is not complied with the shares on which the call was made will be liable to be forfeited. |
11.1.2 | If the requirements of any such Notice are not complied with, any share in respect of which such Notice has been given may at any time thereafter, before payment of all calls and interest due in respect thereof has been made, be forfeited by a resolution of the Board to that effect, and such forfeiture shall include all dividends and bonuses declared in respect of the forfeited share but not actually paid before the forfeiture. |
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11.2 | When any share has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder of the share. No forfeiture shall be invalidated by any omission or neglect to give such Notice. |
11.3 | The Board may accept the surrender of any share liable to be forfeited hereunder and, in such case, references in this Constitution to forfeiture will include surrender. |
11.4 | 11.4.1 Any share so forfeited shall be deemed the property of the Company and may be sold, re-allotted or otherwise disposed of to such person, upon such terms and in such manner as the Board determines, and at any time before a sale, re-allotment or disposition the forfeiture may be annulled by the Board on such terms as the Board determines. |
11.4.2 | If any shares are forfeited and sold, any residue after the satisfaction of the unpaid calls and any accrued interests and expenses shall be paid to the person whose shares have been forfeited, or his executors, administrators or assignees or as he directs. |
11.5 | A person whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares but nevertheless shall remain liable to pay the Company all moneys which at the date of forfeiture were presently payable by him to the Company in respect of the shares, with (if the Directors shall in their discretion so require) interest thereon from the date of forfeiture until payment at such rate (not exceeding twenty per cent. (20%) per annum) as the Board determines. The Board may enforce payment thereof if it thinks fit, and without any deduction or allowance for the value of the forfeited shares, at the date of forfeiture, but his liability shall cease if and when the Company shall have received payment in full of all such moneys in respect of the shares. For the purposes of this Clause 11.5 any sum which, by the terms of issue of a share, is payable thereon at a fixed time which is subsequent to the date of forfeiture, whether on account of the nominal value of the share or by way of premium, shall notwithstanding that time has not yet arrived be deemed to be payable at the date of forfeiture, and the same shall become due and payable immediately upon the forfeiture, but interest thereon shall only be payable in respect of any period between the said fixed time and the date of actual payment. |
11.6 | A declaration in writing by a Director that a share has been forfeited on a specified date shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share, and such declaration shall (subject to the execution of an instrument of transfer by the Company if necessary) constitute a good title to the share, and the person to whom the share is disposed of shall be registered as the holder of the share and shall not be bound to see to the application of the consideration (if any), nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture, sale or disposal of the share. When any share shall have been forfeited, notice of the declaration shall be given to the Member in whose name it stood immediately prior to the forfeiture, and an entry of the forfeiture, with the date thereof, shall forthwith be made in the register, but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice or make any such entry. |
11.7 | Notwithstanding any such forfeiture as aforesaid the Board may at any time, before any shares so forfeited shall have been sold, re-allotted or otherwise disposed of, permit the shares forfeited to be bought back upon the terms of payment of all calls and interest due upon and expenses incurred in respect of the share, and upon such further terms (if any) as it thinks fit. |
11.8 | The forfeiture of a share shall not prejudice the right of the Company to any call already made or instalment payable thereon. |
11.9 |
The provisions of this Constitution as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on |
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account of the nominal value of the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.
12. | REGISTER OF MEMBERS |
12.1 | 12.1.1 The Company shall keep in one or more books a Register of its Members and shall enter therein particulars required by the Act. |
12.1.2 | Subject to the Act, the Company may keep an overseas or local or other branch register of Members resident in any place, and the Board may make and vary such regulations as it determines in respect of the keeping of any such register and maintaining a Registration Office in connection therewith. |
12.2 | The Register and branch register of Members, as the case may be, shall be open to inspection for such times and on such days in accordance with the Act. The Register including any overseas or local or other branch register of Members may, after compliance with any notice requirement of the Designated Stock Exchange, be closed at such times or for such periods not exceeding in the whole thirty (30) days in each year as the Board may determine and either generally or in respect of any class of shares. |
13. | RECORD DATES |
13.1 | 13.1.1 For the purpose of determining the Members entitled to notice of or to vote at any Members meeting, or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board may fix, in advance, a date as the record date for any such determination of Members, which date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other such action. |
13.1.2 | If the Board does not fix a record date for any Members meeting, the record date for determining the Members entitled to a notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with this Constitution notice is waived, at the close of business on the day next preceding the day on which the meeting is held. |
13.1.3 | For the purpose of determining the Members entitled to express consent to Members resolution(s) in writing without a meeting, the Board may fix any date as the record date for determining the Members entitled to express consent to such resolution(s) in writing. |
13.1.4 | A determination of the Members of record entitled to notice of or to vote at a meeting of the Members shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. |
14. | TRANSFER OF SHARES |
14.1 | Subject to the provisions of this Constitution, any Member may transfer all or any of his shares by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange or in any other form approved by the Board and may be under hand or, if the transferor or transferee is a clearing house or a central depository house or its nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the Board may approve from time to time. |
14.2 |
If the Board refuses to register a transfer of any share, it shall, within 28 days after the date on which the transfer was lodged with the Company, send to each of the transferor and the |
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transferee notice of the refusal as required by the Act and the reasons for the refusal will be given in the notice.
14.3 | The registration of transfers of shares or of any class of shares may, after compliance with any notice requirement of the Designated Stock Exchange, be suspended at such times and for such periods (not exceeding in the whole thirty (30) days in any year) as the Board may determine. |
15. | TRANSMISSION OF SHARES |
15.1 | If a Member dies, the survivor or survivors where the deceased was a joint holder, and his legal personal representatives where he was a sole or only surviving holder, will be the only persons recognised by the Company as having any title to his interest in the shares; but nothing in this Clause will release the estate of a deceased Member (whether sole or joint) from any liability in respect of any share which had been solely or jointly held by him. |
15.2 | Any person becoming entitled to a share in consequence of the death or bankruptcy or winding-up of a Member may, upon such evidence as to his title being produced as may be required by the Board, elect either to become the holder of the share or to have some person nominated by him registered as the transferee thereof. If he elects to become the holder he shall notify the Company in writing either at the Registration Office or Office, as the case may be, to that effect. If he elects to have another person registered he shall execute a transfer of the share in favour of that person. The provisions of this Constitution relating to the transfer and registration of transfers of shares shall apply to such notice or transfer as aforesaid as if the death or bankruptcy of the Member had not occurred and the notice or transfer were a transfer signed by such Member. |
15.3 | A person becoming entitled to a share by reason of the death or bankruptcy or winding-up of a Member shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share. However, the Board may, if it thinks fit, withhold the payment of any dividend payable or other advantages in respect of such share until such person shall become the registered holder of the share or shall have effectually transferred such share, but, subject to the requirements of Clause 20.10.2 being met, such a person may vote at meetings. |
16. | UNTRACEABLE MEMBERS |
16.1 | 16.1.1 Without prejudice to the rights of the Company under Clause 16.1.2, the Company may cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants have been left uncashed on two consecutive occasions. However, the Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants after the first occasion on which such a cheque or warrant is returned undelivered. |
16.1.2 | The Company shall have the power to sell, in such manner as the Board thinks fit, any shares of a Member who is untraceable, but no such sale shall be made unless: |
(a) | all cheques or warrants in respect of dividends of the shares in question, being not less than three in total number, for any sum payable in cash to the holder of such shares in respect of them sent during the relevant period in the manner authorised by this Constitution have remained uncashed; |
(b) | so far as it is aware at the end of the relevant period, the Company has not at any time during the relevant period received any indication of the existence of the Member who is the holder of such shares or of a person entitled to such shares by death, bankruptcy or operation of law; and |
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(c) | the Company, if so required by the rules governing the listing of shares on the Designated Stock Exchange, has given notice to, and caused advertisement in newspapers to be made in accordance with the requirements of, the Designated Stock Exchange of its intention to sell such shares in the manner required by the Designated Stock Exchange, and a period of three months or such shorter period as may be allowed by the Designated Stock Exchange has elapsed since the date of such advertisement. |
For the purpose of the foregoing, the relevant period means the period commencing twelve (12) years before the date of publication of the advertisement referred to in paragraph (c) of this Clause 16.1.2 and ending at the expiry of the period referred to in that paragraph.
16.1.3 | To give effect to any such sale the Board may authorise some person to transfer the said shares and an instrument of transfer signed or otherwise executed by or on behalf of such person shall be as effective as if it had been executed by the registered holder or the person entitled by transmission to such shares, and the purchaser shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale. The net proceeds of the sale will belong to the Company and upon receipt by the Company of such net proceeds it shall become indebted to the former Member for an amount equal to such net proceeds. No trust shall be created in respect of such debt and no interest shall be payable in respect of it and the Company shall not be required to account for any money earned from the net proceeds which may be employed in the business of the Company or as it thinks fit. Any sale under this Clause 16 shall be valid and effective notwithstanding that the Member holding the shares sold is dead, bankrupt or otherwise under any legal disability or incapacity. |
17. | MEMBERS MEETINGS |
17.1 | An annual meeting of the Members of the Company shall be held each year at such time and place as may be determined by the Board, provided that an annual meeting shall be held not more than once in each year and not later than 6 months after the balance sheet date of the Company and not later than 15 months after the previous annual meeting of the Company. |
17.2 | Each Members meeting, other than an annual meeting, shall be called a special meeting. All Members meetings (including annual meetings of the Company) may be held at such times and in any location in the world as may be determined by the Board. |
17.3 | The Board may whenever it thinks fit call special meetings, and, subject to the Act, Members holding at the date of deposit of the requisition not less than 5 per cent (5%) of the voting rights entitled to be exercised on the issue shall at all times have the right, by written requisition to the Board or the Secretary of the Company, to require a special meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two (2) months after the deposit of such requisition. |
18. | NOTICE OF MEMBERS MEETINGS |
18.1 | 18.1.1 At least fourteen (14) and not more than sixty (60) days Notice of a Members meeting shall be given to each Member entitled to attend and vote thereat. A Members meeting at which the passing of a special resolution is to be considered shall be called by not less than twenty-one (21) clear days Notice. A Members meeting, whether or not a special resolution will be considered at such meeting, may be called by shorter notice if it is so agreed by all the Members entitled to attend and vote thereat. |
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18.1.2 | The notice shall specify the time and place of the meeting, the nature of the business to be transacted at the meeting in sufficient detail to enable a Member to form a reasoned judgment in relation to it and the text of any special resolution to be submitted to the meeting. The notice convening an annual meeting shall specify the meeting as such. Notice of every Members meeting shall be given to all Members other than to such Members as, under the provisions of this Constitution or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, to all persons entitled to a share in consequence of the death or bankruptcy or winding-up of a Member and to each of the Directors and the Auditors. |
18.1.3 | The Secretary may postpone any Members meeting called in accordance with the provisions of this Constitution (other than a meeting requisitioned under this Constitution) provided that notice of postponement is given to each Member before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member in accordance with the provisions of this Constitution. |
18.2 | The accidental omission to give Notice of a meeting or (in cases where instruments of proxy are sent out with the Notice) to send such instrument of proxy to, or the non-receipt of such Notice or such instrument of proxy by, any person entitled to receive such Notice shall not invalidate any resolution passed or the proceedings at that meeting. |
19. | PROCEEDINGS AT MEMBERS MEETINGS |
19.1 | 19.1.1 Members may participate in any Members meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting. |
19.1.2 | Any annual meeting at which any business other than the following is transacted shall be deemed to be a special meeting: |
(a) | the declaration and sanctioning of dividends; |
(b) | consideration and adoption of the accounts and balance sheet and the reports of the Directors and Auditors and other documents required to be annexed to the balance sheet; |
(c) | the election, appointment or re-appointment of Directors; |
(d) | appointment or re-appointment of Auditors (where special notice of the intention for such appointment is not required by the Law) and other officers; and |
(e) | the fixing of the remuneration of the Auditors, and the voting of remuneration or extra remuneration to the Directors. |
19.1.3 | No business, other than the appointment of a chairman of a meeting, shall be transacted at any Members meeting unless a quorum of Members is present at the time when the meeting proceeds to business. Except as herein otherwise provided, a quorum for a meeting of Members shall be present where the Members or their proxies, or being a corporation by its representative duly authorized, are present or have cast postal votes, who are between them able to exercise not less than 33.3% of the votes to be cast on the business to be transacted by the meeting. |
19.2 |
If within thirty (30) minutes (or such longer time not exceeding one hour as the chairman of the meeting may determine to wait) after the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day in the next week at the same time and place |
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or to such time and place as the Board may determine. If at such adjourned meeting a quorum is not present within half an hour from the time appointed for holding the meeting, the meeting shall be dissolved. |
19.3 | The chairman of the Board shall preside as chairman at every Members meeting. If at any meeting the chairman is not present within fifteen (15) minutes after the time appointed for holding the meeting, or is not willing to act as chairman, the Directors present shall choose one of their number to act, or if one Director only is present he shall preside as chairman if willing to act. If no Director is present, or if each of the Directors present declines to take the chair, or if the chairman chosen shall retire from the chair, the Members present in person or by proxy and entitled to vote shall elect one of their number to be chairman. |
19.4 | The chairman may adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business which might lawfully have been transacted at the meeting had the adjournment not taken place. When a meeting is adjourned for fourteen (14) days or more, at least seven (7) clear days notice of the adjourned meeting shall be given specifying the time and place of the adjourned meeting but it shall not be necessary to specify in such notice the nature of the business to be transacted at the adjourned meeting and the general nature of the business to be transacted. Save as aforesaid, it shall be unnecessary to give notice of an adjournment. |
19.5 | If an amendment is proposed to any resolution under consideration but is in good faith ruled out of order by the chairman of the meeting, the proceedings on the substantive resolution shall not be invalidated by any error in such ruling. In the case of a resolution duly proposed as a special resolution, no amendment thereto (other than a mere clerical amendment to correct a patent error) may in any event be considered or voted upon. |
20. | VOTING |
20.1 | Subject to any special rights or restrictions as to voting for the time being attached to any shares or any class of shares by or in accordance with this Constitution, at any Members meeting on a show of hands every Member present in person (or being a corporation, is present by a duly authorised representative) or by proxy shall have one vote and on a poll, every Member present in person or by proxy or, in the case of a Member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purposes as paid up on the share. Notwithstanding anything contained in this Constitution, where more than one proxy is appointed by a Member which is a clearing house or a central depository house (or its nominee(s)), each such proxy shall have one vote on a show of hands. A resolution put to the vote of a meeting shall be decided on a show of hands unless voting by way of a poll is required by the rules of the Designated Stock Exchange or (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded: |
20.1.1 | by the chairman of such meeting; or |
20.1.2 | by not less than five Members present in person or (in the case of a Member being a corporation) by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or |
20.1.3 | by a Member or Members present in person or (in the case of a Member being a corporation) by its duly authorised representative or by proxy and representing not less than ten per cent. (10%) of the total voting rights of all Members having the right to vote at the meeting; or |
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20.1.4 | by a Member or Members present in person or (in the case of a Member being a corporation) by its duly authorised representative or by proxy and holding shares in the Company that confer a right to vote at the meeting and on which the aggregate amount paid up is not less than ten per cent. (10%) of the total amount paid up on all shares conferring that right. |
A demand by a person as proxy for a Member or in the case of a Member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Member.
20.2 | Unless a poll is duly demanded and the demand is not withdrawn, a declaration by the chairman that a resolution has been carried, or carried unanimously, or by a particular majority, or not carried by a particular majority, or lost, and an entry to that effect made in the minute book of the Company, shall be conclusive evidence of the facts without proof of the number or proportion of the votes recorded for or against the resolution. |
20.3 | If a poll is duly demanded the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. There shall be no requirement for the chairman to disclose the voting figures on a poll. |
20.4 | A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken in such manner (including the use of ballot or voting papers or tickets) and either forthwith or at such time (being not later than thirty (30) days after the date of the demand) and place as the chairman directs. It shall not be necessary (unless the chairman otherwise directs) for notice to be given of a poll not taken immediately. |
20.5 | The demand for a poll shall not prevent the continuance of a meeting or the transaction of any business other than the question on which the poll has been demanded, and, with the consent of the chairman, it may be withdrawn at any time before the close of the meeting or the taking of the poll, whichever is the earlier. |
20.6 | On a poll votes may be given either personally or by proxy. |
20.7 | A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way. |
20.8 | All questions submitted to a meeting shall be decided by a simple majority of votes except where a greater majority is required by this Constitution or by the Law. The chairman of such meeting shall not be entitled to a second or casting vote. |
20.9 | Where there are joint holders of any share any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register in respect of the joint holding. Several executors or administrators of a deceased Member in whose name any share stands shall for the purposes of this Clause 20.9 be deemed joint holders thereof. |
20.10 |
20.10.1 A Member who is a patient for any purpose relating to mental health or in respect of whom an order has been made by any court having jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote, whether on a show of hands or on a poll, by his receiver, committee, curator bonis or other person in the nature of a receiver, committee or curator bonis appointed by such court, and such receiver, committee, curator bonis or other person may vote on a poll by proxy, and may otherwise act and be treated as if he were the registered holder of such shares for the purposes |
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of Members meetings, provided that such evidence as the Board may require of the authority of the person claiming to vote shall have been deposited at the Office, head office or Registration Office, as appropriate, not less than forty-eight (48) hours before the time appointed for holding the meeting, or adjourned meeting or poll, as the case may be. |
20.10.2 | Any person entitled under Clause 15.2 to be registered as the holder of any shares may vote at any Members meeting in respect thereof in the same manner as if he were the registered holder of such shares, provided that forty-eight (48) hours at least before the time of the holding of the meeting or adjourned meeting, as the case may be, at which he proposes to vote, he shall satisfy the Board of his entitlement to such shares, or the Board shall have previously admitted his right to vote at such meeting in respect thereof. |
20.11 | No Member shall, unless the Board otherwise determines, be entitled to attend and vote and to be reckoned in a quorum at any Members meeting unless he is duly registered and all calls or other sums presently payable by him in respect of shares in the Company have been paid. |
20.12 | If: |
20.12.1 | any objection shall be raised to the qualification of any voter; or |
20.12.2 | any votes have been counted which ought not to have been counted or which might have been rejected; or |
20.12.3 | any votes are not counted which ought to have been counted; |
the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters shall be final and conclusive.
21. | PROXIES AND POSTAL VOTES |
21.1 | Any Member entitled to attend and vote at a meeting of the Company shall be entitled to appoint another person as his proxy to attend and vote instead of him. A Member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a Members meeting of the Company or at a class meeting, provided that the number of proxies to be appointed by a Member shall not exceed the number of shares held by such Member. A proxy need not be a Member. In addition, a proxy or proxies representing either a Member who is an individual or a Member which is a corporation shall be entitled to exercise the same powers on behalf of the Member which he or they represent as such Member could exercise. |
21.2 | The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of an instrument of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of proxy on behalf of the corporation without further evidence of the facts. The instrument appointing a proxy shall state whether the appointment is for a particular meeting or a specified term. |
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21.3 | The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power or authority, shall be delivered to such place or one of such places (if any) as may be specified for that purpose in or by way of note to or in any document accompanying the notice convening the meeting (or, if no place is so specified at the Registration Office or the Office, as may be appropriate) not less than twenty-four (24) hours before the time appointed for holding the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than twenty-four (24) hours before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid. No instrument appointing a proxy shall be valid after the expiration of twelve (12) months from the date named in it as the date of its execution, except at an adjourned meeting or on a poll demanded at a meeting or an adjourned meeting in cases where the meeting was originally held within twelve (12) months from such date. Delivery of an instrument appointing a proxy shall not preclude a Member from attending and voting in person at the meeting convened and in such event, the instrument appointing a proxy shall be deemed to be revoked. |
21.4 | Instruments of proxy shall be in any common form or in such other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting forms of instrument of proxy for use at the meeting. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates. |
21.5 | A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the instrument of proxy or of the authority under which it was executed, provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the Office or the Registration Office (or such other place as may be specified for the delivery of instruments of proxy in the notice convening the meeting or other document sent therewith) two hours at least before the commencement of the meeting or adjourned meeting, or the taking of the poll, at which the instrument of proxy is used. |
21.6 | Anything which under this Constitution a Member may do by proxy he may likewise do by his duly appointed attorney and the provisions of this Constitution relating to proxies and instruments appointing proxies shall apply mutatis mutandis in relation to any such attorney and the instrument under which such attorney is appointed. |
21.7 | 21.7.1 A Member may exercise the right to vote at a meeting by casting a postal vote in accordance with this Clause 21.7. |
21.7.2 | The notice of a meeting at which Members are entitled to cast a postal vote shall state the name of the person authorised by the Board to receive and count postal votes at that meeting. |
21.7.3 | Where no person has been authorised to receive and count postal votes at a meeting, or where no person is named as being so authorised in the notice of the meeting, every Director shall be deemed to be so authorised. |
21.7.4(a) | A Member may cast a postal vote on all or any of the matters to be voted on at the meeting by sending a notice in the manner in which his shares are to be voted to a person authorised to receive and count postal votes at that meeting. |
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(b) | The notice shall reach that person not less than 48 hours before the start of the meeting. |
21.7.5 | A person authorised to receive and count postal votes at a meeting shall |
(a) | collect together all postal votes received by him or by the Company; |
(b) | in relation to each resolution to be voted on at the meeting, count |
(i) | the number of Members voting in favour of the resolution and the number of votes cast by each Member in favour of the resolution; and |
(ii) | the number of Members voting against the resolution, and the number of votes cast by each Member against the resolution; |
(c) | sign a certificate that he has carried out the duties set out in subparagraphs (a) and (b) of this Clause 21.7.5 which sets out the results of the counts required by subparagraph (b); and |
(d) | ensure that the certificate required by subparagraph (c) of this Clause 21.7.5 is presented to the chairperson of the meeting. |
21.7.6 | Where a vote is taken at a meeting on a resolution on which postal votes have been cast, the chairperson of the meeting shall |
(a) | on a vote by show of hands, count each Member who has submitted a postal vote for or against the resolution; and |
(b) | on a poll, count the votes cast by each Member who has submitted a postal vote for or against the resolution. |
21.7.7 | The chairperson of a meeting shall call for a poll on a resolution on which he holds sufficient postal votes that he believes that, where a poll is taken, the result may differ from that obtained on a show of hands. |
21.7.8 | The chairperson of a meeting shall ensure that a certificate of postal votes held by him is annexed to the minutes of the meeting. |
22. | CORPORATIONS ACTING BY REPRESENTATIVES |
22.1 | 22.1.1 Any corporation which is a Member may by an instrument in writing under its seal or under the hand of an officer, attorney or other person authorised to sign the same authorise such person as it thinks fit to act as its representative at any meeting of the Company or at any meeting of any class of Members. In the case of such an instrument purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such instrument of authorisation on behalf of the corporation without further evidence of the facts. The person so authorised shall be entitled to exercise the same powers on behalf of such corporation as the corporation could exercise if it were an individual Member and such corporation shall for the purposes of this Constitution be deemed to be present in person at any such meeting if a person so authorised is present thereat. |
22.1.2 |
If a clearing house (or its nominee(s)) or a central depository entity, being a corporation, is a Member, it may authorise such persons as it thinks fit to act as its representatives at any meeting of the Company or at any meeting of any class of Members provided that the authorisation shall specify the number and class of shares in respect of which each such representative is so authorised. Each person so authorised under the provisions of this Clause 22.1.2 shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the |
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same rights and powers on behalf of the clearing house or central depository entity (or its nominee(s)) as if such person was the registered holder of the shares of the Company held by the clearing house or a central depository entity (or its nominee(s)) including the right to vote individually on a show of hands. |
22.1.3 | Any reference in this Constitution to a duly authorised representative of a Member being a corporation shall mean a representative authorised under the provisions of this Clause 22. |
23. | WRITTEN RESOLUTIONS OF MEMBERS |
23.1 | 23.1.1 Subject to the Act and the provisions of this Constitution, a resolution in writing signed (in such manner as to indicate, expressly or impliedly, unconditional approval) by or on behalf of not less than 75 per cent. (75%) of the persons for the time being entitled to receive notice of and to attend and vote at Members meetings of the Company and who together hold not less than 75 per cent. (75%) of the votes entitled to be cast on that resolution shall, for the purposes of this Constitution, be treated as a resolution duly passed at a special meeting of the Company. Any such resolution shall be deemed to have been passed at a meeting held on the date on which it was signed by the last Member to sign, and where the resolution states a date as being the date of his signature thereof by any Member the statement shall be prima facie evidence that it was signed by him on that date. Such a resolution may consist of several documents in the like form, each signed by one or more relevant Members. |
23.1.2 | Any power which the Act or this Constitution requires to be exercised by an ordinary resolution or a special resolution may be exercised by way of unanimous resolution. |
23.1.3 | A resolution in writing may be signed in any number of counterparts and without any prior notice being given to the Members. |
23.1.4 | Within 7 days of a resolution being passed in writing, the Company shall send a copy of the resolution to every Member who did not sign the resolution or on whose behalf the resolution was not signed. |
23.1.5 | A resolution in writing made in accordance with this Constitution shall constitute minutes for the purposes of the Act. |
23.1.6 | Notwithstanding any provisions contained in this Constitution, a resolution in writing may not be passed by the Members in lieu of an annual meeting of the Company or for the purpose of removing a Director before the expiration of his term of office under Clause 24.1.5 or for the purpose set out in Clause 45.1.2 relating to the removal and appointment of the Auditor. |
24. | BOARD OF DIRECTORS |
24.1 | 24.1.1 Unless otherwise determined by the Company by ordinary resolution of the Members, the number of Directors shall not be less than three (3). There shall be no maximum number of Directors unless otherwise determined from time to time by ordinary resolution of the Members. For so long as the Company holds a Category 1 Global Business Licence issued by the Financial Services Commission, the Company shall have at least 2 directors resident in Mauritius or such number of directors resident in Mauritius as may be necessary or required under the Law. |
24.1.2 | Subject to the provisions of this Constitution and the Law, the Company may by ordinary resolution elect any person to be a Director either to fill a casual vacancy or as an addition to the existing Board. |
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24.1.3 | The Directors shall have the power from time to time and at any time to appoint any person as a Director to fill a casual vacancy on the Board or as an addition to the existing Board. |
24.1.4 | No Director shall be required to hold any shares of the Company by way of qualification and a Director who is not a Member shall be entitled to receive notice of and to attend and speak at any Members meeting of the Company and of all classes of shares of the Company. |
24.1.5 | A Director may be removed by way of an ordinary resolution of the Members at any time before the expiration of his period of office notwithstanding anything in this Constitution or in any agreement between the Company and such Director (but without prejudice to any claim for damages under any such agreement). The notice of meeting shall state that the purpose of the meeting includes the removal of such Director. |
24.1.6 | A vacancy on the Board created by the removal of a Director under the provisions of Clause 24.1.5 above may be filled by the election or appointment by ordinary resolution of the Members at the meeting at which such Director is removed or by the affirmative vote of a simple majority of the remaining Directors present and voting at a Board meeting. Any Director so appointed by the Board shall hold office only until the next following annual meeting of the Company and shall then be eligible for re-election. |
24.1.7 | The Company may from time to time by ordinary resolution increase or reduce the number of Directors but so that the number of Directors shall never be less than three (3). |
25. | RETIREMENT OF DIRECTORS |
25.1 | 25.1.1 Notwithstanding any other provisions in this Constitution and subject to Clause 25.2.1, at each annual meeting of the Company one-third of the Directors for the time being (or, if their number is not a multiple of three (3), the number nearest to but not greater than one-third) shall retire from office by rotation provided that notwithstanding anything herein, the chairman of the Board and/or the managing director of the Company shall not, whilst holding such office, be subject to retirement by rotation or be taken into account in determining the number of Directors to retire in each year. |
25.1.2 | A retiring Director shall be eligible for re-election. The Directors to retire by rotation shall include (so far as necessary to ascertain the number of directors to retire by rotation) any Director who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. Any Director appointed pursuant to Clause 24.1.3 or Clause 24.1.6 shall be taken into account in determining which particular Directors or the number of Directors who are to retire by rotation. |
25.2 |
25.2.1 A Director shall vacate his office as director of the Company at the conclusion of the annual meeting of the Company commencing next after the Director attains the age of 70 years. Such Director may, by an ordinary resolution of which no shorter notice is given than that required to be given for the holding of a meeting of Members, be appointed or re-appointed as a Director of the Company to hold office until the next annual meeting of the Company or be |
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authorised to continue to hold office as a Director until the next annual meeting of the Company. The provisions of Clause 25.1 shall not apply to such Director. |
25.2.2 | Subject to the Clause 25.2.1, no person other than a Director retiring at the meeting shall, unless recommended by the Directors for election, be eligible for election as a Director at any Members meeting unless a Notice signed by a Member (other than the person to be proposed) duly qualified to attend and vote at the meeting for which such notice is given of his intention to propose such person for election and also a Notice signed by the person to be proposed of his willingness to be elected shall have been lodged at the head office or at the Registration Office provided that the minimum length of the period, during which such Notice(s) are given, shall be at least seven (7) days and that the period for lodgment of such Notice(s) shall commence no earlier than the day after the dispatch of the notice of the Members meeting appointed for such election and end no later than seven (7) days prior to the date of such Members meeting. |
26. | DISQUALIFICATION OF DIRECTORS |
26.1 | The office of a Director shall be vacated if such Director: |
26.1.1 | dies; |
26.1.2 | resigns his office by notice in writing delivered to the Company at the Office tendered at a meeting of the Board; or |
26.1.3 | is removed from office by ordinary resolution of the Members pursuant to Clause 24.1.5 or Clause 26.2. |
26.2 | A Director may be removed by way of an ordinary resolution of the Members, or by the affirmative vote of a simple majority of the Directors, at any time: |
26.2.1 | for cause, in the event of such Directors wilful misconduct, fraud, conviction of a felony, gross negligence or breach of a written policy of the Company; |
26.2.2 | if such Director becomes of unsound mind; |
26.2.3 | becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; |
26.2.4 | becomes disqualified from being a Director under the Act or is prohibited by law from being a Director; or |
26.2.5 | ceases to hold office pursuant to Section 139 of the Act or ceases to be a Director by virtue of any provision of the Statutes. |
27. | EXECUTIVE DIRECTORS |
27.1 |
The Board may from time to time appoint any one or more of its body to be a managing director, joint managing director or deputy managing director or to hold any other employment or executive office with the Company for such period (subject to their continuance as Directors) and upon such terms as the Board may determine and the Board may revoke or terminate any of such appointments. Any such revocation or termination as aforesaid shall be without prejudice to any claim for damages that such Director may have against the Company or the Company may have against such Director. A Director appointed to an office under this Clause shall be subject to the same provisions as to removal as the other Directors of the Company, and he shall (subject to the provisions of any contract between him and the Company) ipso facto and |
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immediately cease to hold such office if he shall cease to hold the office of Director for any cause. |
27.2 | Notwithstanding Clauses 29.1, 29.2, 29.3 and 29.4, an executive director appointed to an office under Clause 27.1 hereof shall receive such remuneration (whether by way of salary, commission, participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the Board may from time to time determine, and either in addition to or in lieu of his remuneration as a Director. |
28. | ALTERNATE DIRECTORS |
28.1 | Any Director may at any time by Notice delivered to the Office or head office or at a meeting of the Directors appoint any person (including another Director) to be his alternate Director. Any person so appointed shall have all the rights and powers of the Director or Directors for whom such person is appointed in the alternative provided that such person shall not be counted more than once in determining whether or not a quorum is present. An alternate Director may be removed at any time by the body which appointed him and, subject thereto, the office of alternate Director shall continue until the happening of any event which, if he were a Director, would cause him to vacate such office or if his appointor ceases for any reason to be a Director. Any appointment or removal of an alternate Director shall be effected by Notice signed by the appointor and delivered to the Office or head office or tendered at a meeting of the Board. An alternate Director may also be a Director in his own right and may act as alternate to more than one Director. An alternate Director shall, if his appointor so requests, be entitled to receive notices of meetings of the Board or of committees of the Board to the same extent as, but in lieu of, the Director appointing him and shall be entitled to such extent to attend and vote as a Director at any such meeting at which the Director appointing him is not personally present and generally at such meeting to exercise and discharge all the functions, powers and duties of his appointor as a Director and for the purposes of the proceedings at such meeting the provisions of this Clause 28 shall apply as if he were a Director save that as an alternate for more than one Director his voting rights shall be cumulative. |
28.2 | An alternate Director shall only be a Director for the purposes of the Law and shall only be subject to the provisions of the Law insofar as they relate to the duties and obligations of a Director when performing the functions of the Director for whom he is appointed in the alternative and shall alone be responsible to the Company for his acts and defaults and shall not be deemed to be the agent of or for the Director appointing him. An alternate Director shall be entitled to contract and be interested in and benefit from contracts or arrangements or transactions and to be repaid expenses and to be indemnified by the Company to the same extent mutatis mutandis as if he were a Director but he shall not be entitled to receive from the Company any fee in his capacity as an alternate Director except only such part, if any, of the remuneration otherwise payable to his appointor as such appointor may by Notice to the Company from time to time direct. |
28.3 | Every person acting as an alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). If the appointor of an alternate Director is for the time being absent from his usual place of residence or otherwise not available or unable to act, the signature of an alternate Director to any resolution in writing of the Board or a committee of the Board of which his appointor is a member shall, unless the notice of his appointment provides to the contrary, be as effective as the signature of his appointor. |
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28.4 | An alternate Director shall ipso facto cease to be an alternate Director if his appointor ceases for any reason to be a Director, PROVIDED always that, if at any meeting any Director retires but is re-elected at the same meeting, any appointment of an alternate Director to such retiring Director pursuant to this Constitution which was in force immediately before such retiring Directors retirement shall remain in force as though he had not retired. |
29. | DIRECTORS FEES AND EXPENSES |
29.1 | The Directors shall receive such remuneration as the Board may from time to time determine. |
29.2 | Each Director shall be entitled to be repaid or prepaid all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred by him in attending meetings of the Board or committees of the board or Members meetings or separate meetings of any class of shares or of debenture of the Company or otherwise in connection with the discharge of his duties as a Director. |
29.3 | Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other provision of this Constitution. |
29.4 | The Board shall obtain the approval of the Company in Members meeting before making any payment to any Director or past Director of the Company by way of compensation for loss of office, or as consideration for or in connection with his retirement from office (not being payment to which the Director is contractually entitled). |
30. | DIRECTORS INTERESTS |
30.1 | Subject to the Act, a Director may: |
30.1.1 | hold any other office or place of profit with the Company (except that of Auditor) in conjunction with his office of Director for such period and upon such terms as the Board may determine. Any remuneration (whether by way of salary, commission, participation in profits or otherwise) paid to any Director in respect of any such other office or place of profit shall be in addition to any remuneration provided for by or pursuant to any other provision of this Constitution; |
30.1.2 | act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor) and he or his firm may be remunerated for professional services as if he were not a Director; and |
30.1.3 |
continue to be or become a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of any other company promoted by the Company or in which the Company may be interested as a vendor, shareholder or otherwise and (unless otherwise agreed) no such Director shall be accountable for any remuneration, profits or other benefits received by him as a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer or member of or from his interests in any such other company. Subject as otherwise provided by this Constitution, the Directors may exercise or cause to be exercised the voting powers conferred by the shares in any other company held or owned by the Company, or exercisable by them as Directors of such other company in such manner in all respects as they think fit (including the exercise thereof in favour of any resolution appointing |
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themselves or any of them as directors, managing directors, joint managing directors, deputy managing directors, executive directors, managers or other officers of such company or voting or providing for the payment of remuneration to the director, managing director, joint managing director, deputy managing director, executive director, manager or other officers of such other company) and any Director may vote in favour of the exercise of such voting rights in manner aforesaid notwithstanding that he may be, or about to be, appointed a director, managing director, joint managing director, deputy managing director, executive director, manager or other officer of such a company, and that as such he is or may become interested in the exercise of such voting rights in manner aforesaid. |
30.2 | Subject to the Law and to this Constitution, no Director or proposed or intending Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the Members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or of the fiduciary relationship thereby established provided that such Director shall disclose the nature of his interest in any contract or arrangement in which he is interested in accordance with Clause 30.3 herein. |
30.3 | To the full extent required by the Law, a Director shall, forthwith after becoming aware of the fact that he is interested in a transaction or proposed transaction with the Company, cause to be entered in the interests register of the Company where it has one, and disclose to the Board, the nature and monetary value of that interest or where the monetary value of the Directors interest cannot be quantified, the nature and extent of that interest. A general notice entered in the interests register or disclosed to the Board to the effect that a Director is a shareholder, director, officer or trustee of another named company or other person and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that company or person, shall be a sufficient disclosure of interest in relation to that transaction. |
30.4 | A Director shall not vote in respect of any contract or arrangement or proposed contract or arrangement in which such Director has any interest, directly or indirectly, and if he does vote, his vote shall not be counted. Such Director may, however, attend a meeting of Directors at which a matter relating to the transaction arises and be included among the Directors present at the meeting for the purpose of a quorum at such meeting. |
31. | GENERAL POWERS OF THE DIRECTORS |
31.1 | 31.1.1 The business of the Company shall be managed and conducted by the Board, which may exercise all powers of the Company (whether relating to the management of the business of the Company or otherwise) which are not by the Statutes or by this Constitution required to be exercised by the Company in Members meeting, subject nevertheless to the provisions of the Statutes and of this Constitution and to such regulations being not inconsistent with such provisions, as may be prescribed by the Company in Members meeting, but no regulations made by the Company in Members meeting shall invalidate any prior act of the Board which would have been valid if such regulations had not been made. The general powers given by this Clause 31 shall not be limited or restricted by any special authority or power given to the Board by any other provision of this Constitution. |
31.1.2 |
Any person contracting or dealing with the Company in the ordinary course of business shall be entitled to rely on any written or oral contract or agreement or deed, |
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document or instrument entered into or executed as the case may be by any two of the Directors acting jointly on behalf of the Company and the same shall be deemed to be validly entered into or executed by the Company as the case may be and shall, subject to any rule of law, be binding on the Company. |
31.1.3 | Without prejudice to the general powers conferred by this Constitution, it is hereby expressly declared that the Board shall have the following powers: |
(a) | To give to any person the right or option of requiring at a future date that an allotment shall be made to him of any share at par or at such premium as may be agreed. |
(b) | To give to any Directors, officers or employees of the Company an interest in any particular business or transaction or participation in the profits thereof or in the general profits of the Company either in addition to or in substitution for a salary or other remuneration. |
31.2 | The Board may establish any regional or local boards or agencies for managing any of the affairs of the Company in any place, and may appoint any persons to be members of such local boards, or any managers or agents, and may fix their remuneration (either by way of salary or by commission or by conferring the right to participation in the profits of the Company or by a combination of two or more of these modes) and pay the working expenses of any staff employed by them upon the business of the Company. Subject to the Act and to the extent permitted by law, the Board may delegate to any manager, officer (including any officer of any subsidiary of the Company) or agent or any regional or local board or agency any of the powers, authorities and discretions vested in or exercisable by the Board (other than its powers to make calls and forfeit shares), with power to sub-delegate, and may authorise the members of any of them to fill any vacancies therein and to act notwithstanding vacancies. Any such appointment or delegation may be made upon such terms and subject to such conditions as the Board may think fit, and the Board may remove any person appointed as aforesaid, and may revoke or vary such delegation, but no person dealing in good faith and without notice of any such revocation or variation shall be affected thereby. |
31.3 | The Board may by power of attorney appoint any company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under this Constitution) and for such period and subject to such conditions as it may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney as the Board may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him. Such attorney or attorneys may, if so authorised under the Seal of the Company, execute any deed or instrument under their personal seal with the same effect as the affixation of the Companys Seal. |
31.4 | Subject to the Act, the Board may entrust to and confer upon a managing director, joint managing director, deputy managing director, an executive director or any Director any of the powers exercisable by it upon such terms and conditions and with such restrictions as it thinks fit, and either collaterally with, or to the exclusion of, its own powers, and may from time to time revoke or vary all or any of such powers but no person dealing in good faith and without notice of such revocation or variation shall be affected thereby. |
31.5 |
All cheques, promissory notes, drafts, bills of exchange and other instruments, whether negotiable or transferable or not, and all receipts for moneys paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as |
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the Board shall from time to time by resolution determine. The Companys banking accounts shall be kept with such banker or bankers as the Board shall from time to time determine. |
31.6 | 31.6.1 The Board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Companys moneys to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following Clause 31.6.2 shall include any Director or ex-Director who may hold or have held any executive office or any office of profit under the Company or any of its subsidiary companies) and ex-employees of the Company and their dependants or any class or classes of such person. |
31.6.2 | The Board may pay, enter into agreements to pay or make grants of revocable or irrevocable pensions or other benefits to employees and ex-employees and their dependants, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependants are or may become entitled under any such scheme or fund as mentioned in the last preceding paragraph. Any such pension or benefit may, as the Board considers desirable, be granted to an employee either before and in anticipation of or upon or at any time after his actual retirement, and may be subject or not subject to any terms or conditions as the Board may determine. |
32. | BORROWING POWERS |
32.1 | Subject to the Act, the Board may exercise all the powers of the Company to raise or borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and to issue debentures, bonds and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party. |
32.2 | Any debentures, bonds or other securities may be issued at a discount (other than shares), premium or otherwise and with any special privileges as to redemption, surrender, drawings, allotment of shares, attending and voting at Members meetings of the Company, appointment of Directors and otherwise. |
32.3 | Where any uncalled capital of the Company is charged, all persons taking any subsequent charge thereon shall take the same subject to such prior charge, and shall not be entitled, by notice to the Members or otherwise, to obtain priority over such prior charge. |
32.4 | The Board shall cause a proper register to be kept, in accordance with the provisions of the Law, of all charges specifically affecting the property of the Company and of any series of debentures issued by the Company and shall duly comply with the requirements of the Law in regard to the registration of charges and debentures therein specified and otherwise. |
33. | PROCEEDINGS OF THE DIRECTORS |
33.1 | The Board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it considers appropriate. Questions arising at any meeting shall be determined by a majority of votes. In the case of any equality of votes the chairman of the meeting shall have an additional or casting vote. |
33.2 |
A meeting of the Board may be convened by the Secretary on request of a Director or by any Director. The Secretary shall convene a meeting of the Board of which notice may be given in writing whenever he shall be required so to do by the president or chairman, as the case may be, |
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or any Director. The notice shall include the date, time, and place of the meeting and the matters to be discussed at the meeting. |
33.3 | 33.3.1 The quorum necessary for the transaction of the business of the Board may be fixed by the Board and, unless so fixed at any other number, shall be three (3), Provided That for so long as the Company holds a Category 1 Global Business Licence issued by the Financial Services Commission of Mauritius, the quorum shall include at least two (2) directors from Mauritius or such number of directors from Mauritius as may be necessary or required under the Law. An alternate Director shall be counted in a quorum in the case of the absence of a Director for whom he is the alternate provided that he shall not be counted more than once for the purpose of determining whether or not a quorum is present. |
33.3.2 | Directors may participate in any meeting of the Board by means of a conference telephone or other communications equipment through which all persons participating in the meeting can communicate with each other simultaneously and instantaneously and, for the purpose of counting a quorum, such participation shall constitute presence at a meeting as if those participating were present in person. |
33.3.3 | Any Director who ceases to be a Director at a Board meeting may continue to be present and to act as a Director and be counted in the quorum until the termination of such Board meeting if no other Director objects and if otherwise a quorum of Directors would not be present. |
33.4 | The continuing Directors or a sole continuing Director may act notwithstanding any vacancy in the Board but, if and so long as the number of Directors is reduced below the minimum number fixed by or in accordance with this Constitution, the continuing Directors or Director, notwithstanding that the number of Directors is below the number fixed by or in accordance with this Constitution as the quorum or that there is only one continuing Director, may act for the purpose of filling vacancies in the Board or of summoning Members meetings of the Company but not for any other purpose. |
33.5 | The Chairman of the Board shall be the chairman of all meetings of the Board. If the Chairman of the Board is not present at any meeting within fifteen (15) minutes after the time appointed for holding the same, the Directors present may choose one of their number to be chairman of the meeting. |
33.6 | A meeting of the Board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Board. |
33.7 | 33.7.1 Subject to the Act and to the extent permitted by law, the Board may delegate any of its powers, authorities and discretions to committees (including, without limitation, the Audit Committee), consisting of such Director or Directors and other persons as it thinks fit, and they may, from time to time, revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes. Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations which may be imposed on it by the Board. |
33.7.2 | All acts done by any such committee in conformity with such regulations, and in fulfilment of the purposes for which it was appointed, but not otherwise, shall have like force and effect as if done by the Board, and the Board (or if the Board delegates such power, the committee) shall have power to remunerate the members of any such committee, and charge such remuneration to the current expenses of the Company. |
33.8 |
The meetings and proceedings of any committee consisting of two or more members shall be governed by the provisions contained in this Constitution for regulating the meetings and |
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proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board under the last preceding Clause 33.7, indicating, without limitation, any committee charter adopted by the Board for purposes or in respect of any such committee. |
33.9 | A resolution in writing signed by all the Directors shall be as valid and effectual as if a resolution had been passed at a meeting of the Board duly convened and held. Such resolution may be contained in one document or in several documents in like form each signed by one or more of the Directors and for this purpose a facsimile signature of a Director shall be treated as valid. |
33.10 | All acts bona fide done by the Board or by any committee or by any person acting as a Director or members of a committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the Board or such committee or person acting as aforesaid or that they or any of them were disqualified or had vacated office, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director or member of such committee. |
34. | AUDIT COMMITTEE |
34.1 | Without prejudice to the freedom of the Directors to establish any other committees, for so long as the shares of the Company (or depositary receipts therefor) are listed or quoted on the Designated Stock Exchange, the Board shall establish and maintain an Audit Committee as a committee of the Board, the composition and responsibilities of which shall comply with the rules and regulations of the SEC. |
34.2 | 34.2.1 The Board shall adopt a formal written audit committee charter and review and assess the adequacy of the formal written charter on an annual basis. |
34.2.2 | The Audit Committee shall meet at least once every financial quarter, or more frequently as circumstances dictate. |
34.3 | For so long as the shares of the Company (or depositary receipts therefor) are listed or quoted on the Designated Stock Exchange, the Company shall conduct an appropriate review of all related party transactions on an ongoing basis and shall utilize the Audit Committee for the review and approval of potential conflicts of interest. |
35. | OFFICERS |
35.1 | 35.1.1 The officers of the Company shall consist of the Chairman of the Board, the Directors and Secretary and such additional officers (who may or may not be Directors) as the Board may from time to time determine, all of whom shall be deemed to be officers for the purposes of the Law and this Constitution. |
35.1.2 | The Directors shall, as soon as may be after each appointment or election of Directors, elect amongst the Directors a chairman and if more than one Director is proposed for this office, the election to such office shall take place in such manner as the Directors may determine. |
35.1.3 | The officers shall receive such remuneration as the Directors may from time to time determine. |
35.2 |
35.2.1 The Secretary and additional officers, if any, shall be appointed by the Board and shall hold office on such terms and for such period as the Board may determine. The Secretary shall be ordinarily resident in Mauritius. If thought fit, two or more persons may be appointed as joint |
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Secretaries. The Board may also appoint from time to time on such terms as it thinks fit one or more assistant or deputy Secretaries. |
35.2.2 | The Secretary shall attend all meetings of the Members and shall keep correct minutes of such meetings and enter the same in the proper books provided for the purpose. He shall perform such other duties as are prescribed by the Law or this Constitution or as may be prescribed by the Board. |
35.3 | The officers of the Company shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Directors from time to time. |
35.4 | A provision of the Law or of this Constitution requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as or in place of the Secretary. |
36. | REGISTER OF DIRECTORS AND OFFICERS |
36.1 | The Company shall cause to be kept in one or more books at its Office a Register of Directors and Officers in which there shall be entered the full names and addresses of the Directors and Officers and such other particulars as required by the Law or as the Directors may determine. The Company shall from time to time notify to the said Register of any change that takes place in relation to such Directors and Officers as required by the Law. |
37. | MINUTES |
37.1 | 37.1.1 The Board shall cause minutes to be duly entered in books provided for the purpose: |
(a) | of all elections and appointments of officers; |
(b) | of the names of the Directors present at each meeting of the Directors and of any committee of the Directors; and |
(c) | of all resolutions and proceedings of each meeting of the Members, meetings of the Board and meetings of committees of the Board and where there are managers, of all proceedings of meetings of the managers. |
37.1.2 | Minutes shall be kept by the Secretary at the Office. |
38. | SEAL |
38.1 | 38.1.1 The Company shall have one or more Seals, as the Board may determine. For the purpose of sealing documents creating or evidencing securities issued by the Company, the Company may have a securities seal which is a facsimile of the Seal of the Company with the addition of the word Securities on its face or in such other form as the Board may approve. The Board shall provide for the custody of each Seal and no Seal shall be used without the authority of the Board or of a committee of the Board authorised by the Board in that behalf. Subject as otherwise provided in this Constitution, any instrument to which a Seal is affixed shall be signed autographically by one Director and the Secretary or by two Directors or by such other person (including a Director) or persons as the Board may appoint, either generally or in any particular case, save that as regards any certificates for shares or debentures or other securities of the Company the Board may by resolution determine that such signatures or either of them shall be dispensed with or affixed by some method or system of mechanical signature. Every instrument executed in manner provided by this Clause 38.1.1 shall be deemed to be sealed and executed with the authority of the Board previously given. |
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38.1.2 | Where the Company has a Seal for use abroad, the Board may by writing under the Seal appoint any agent or committee abroad to be the duly authorised agent of the Company for the purpose of affixing and using such Seal and the Board may impose restrictions on the use thereof as may be thought fit. Wherever in this Constitution reference is made to the Seal, the reference shall, when and so far as may be applicable, be deemed to include any such other Seal as aforesaid. |
39. | AUTHENTICATION OF DOCUMENTS |
39.1 | Any Director or the Secretary or any person appointed by the Board for the purpose may authenticate any documents affecting the constitution of the Company and any resolution passed by the Company or the Board or any committee, and any books, records, documents and accounts relating to the business of the Company, and to certify copies thereof or extracts therefrom as true copies or extracts, and if any books, records, documents or accounts are elsewhere than at the Office or the head office the local manager or other officer of the Company having the custody thereof shall be deemed to be a person so appointed by the Board. A document purporting to be a copy of a resolution, or an extract from the minutes of a meeting, of the Company or of the Board or any committee which is so certified shall be conclusive evidence in favour of all persons dealing with the Company upon the faith thereof that such resolution has been duly passed or, as the case may be, that such minutes or extract is a true and accurate record of proceedings at a duly constituted meeting. |
40. | DESTRUCTION OF DOCUMENTS |
40.1 | 40.1.1 The Company shall be entitled to destroy the following documents at the following times: |
(a) | any share certificate which has been cancelled at any time after the expiry of one (1) year from the date of such cancellation; |
(b) | any dividend mandate or any variation or cancellation thereof or any notification of change of name or address at any time after the expiry of two (2) years from the date such mandate variation cancellation or notification was recorded by the Company; |
(c) | any instrument of transfer of shares which has been registered at any time after the expiry of seven (7) years from the date of registration; |
(d) | any allotment letters after the expiry of seven (7) years from the date of issue thereof; and |
(e) | copies of powers of attorney, grants of probate and letters of administration at any time after the expiry of seven (7) years after the account to which the relevant power of attorney, grant of probate or letters of administration related has been closed; |
and it shall conclusively be presumed in favour of the Company that every entry in the Register purporting to be made on the basis of any such documents so destroyed was duly and properly made and every share certificate so destroyed was a valid certificate duly and properly cancelled and that every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and that every other document destroyed hereunder was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company. Provided always that: (1) the foregoing provisions of this Clause 40.1.1 shall apply only to the destruction of a document in good faith and without express notice to the Company that the preservation of such document was relevant to a claim; (2) nothing contained in this Clause 40.1.1 shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any
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case where the conditions of proviso (1) above are not fulfilled; and (3) references in this Clause 40 to the destruction of any document include references to its disposal in any manner.
40.1.2 | Notwithstanding any provision contained in this Constitution, the Directors may, if permitted by applicable law, authorise the destruction of documents set out in sub-paragraphs 40.1.1(a) to (e) of this Clause 40.1.1 and any other documents in relation to share registration which have been microfilmed or electronically stored by the Company or by the share register on its behalf provided always that this Clause 40 shall apply only to the destruction of a document in good faith and without express notice to the Company and its share register that the preservation of such document was relevant to a claim. |
41. | DIVIDENDS AND OTHER PAYMENTS |
41.1 | Subject to the Law and the provisions of this Constitution, the Company may by ordinary resolution or the Board may from time to time declare dividends in any currency to be paid to the Members but no dividend shall be declared in excess of the amount recommended by the Board. |
41.2 | No distribution (which includes dividend) may be made by the Company unless that distribution has been authorised by the Board and, save as otherwise provided in this Constitution (including, without limitation, Clause 41.4), has been approved by the Members by ordinary resolution. Dividends may only be declared and paid out of the retained earnings of the Company, after having made good any accumulated losses at the beginning of the accounting period and no distribution (which includes dividend) may be made unless the Board is satisfied that upon the distribution being made (a) the Company is able to pay its debts as they become due in the normal course of business, and (b) the value of the Companys assets is greater than the sum of (i) the value of its liabilities and (ii) the Companys stated capital. |
41.3 | Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provide: |
41.3.1 | all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for the purposes of this Clause 41.3.1 as paid up on the share; and |
41.3.2 | all dividends shall be apportioned and paid pro rata according to the amounts paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. |
41.4 | The Board may from time to time pay to the Members such interim dividends as appear to the Board to be justified by the profits of the Company and in particular (but without prejudice to the generality of the foregoing) if at any time the share capital of the Company is divided into different classes, the Board may pay such interim dividends in respect of those shares in the capital of the Company which confer on the holders thereof deferred or non-preferential rights as well as in respect of those shares which confer on the holders thereof preferential rights with regard to dividend and provided that the Board acts bona fide, the Board shall not incur any responsibility to the holders of shares conferring any preference for any damage that they may suffer by reason of the payment of an interim dividend on any shares having deferred or non-preferential rights and may also pay any fixed dividend which is payable on any shares of the Company half-yearly or on any other dates, whenever such profits, in the opinion of the Board, justifies such payment. |
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41.5 | The Board may retain any dividend or other moneys payable on or in respect of a share on which the Company has a lien and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists. |
41.6 | No dividend or other moneys payable by the Company on or in respect of any share shall bear interest against the Company. |
41.7 | Any dividend, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his registered address or, in the case of joint holders, addressed to the holder whose name stands first in the Register in respect of the shares at his address as appearing in the Register or addressed to such person and at such address as the holder or joint holders may in writing direct or may be sent by remittance or telegraphic transfer to the bank account of the holder at his bank account as may be notified in writing to the Company or , in the case of joint holders, to the bank account of the holder whose name stands first in the Register in respect of the shares, provided that such holder has provided to the Company in writing complete information in respect of his/its bank account so as to enable such remittance or telegraphic transfer to be made. Every such cheque or warrant or remittance or telegraphic transfer shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first on the Register in respect of such shares, and shall be sent or done (as the case may be) at his or their risk. Payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company notwithstanding that it may subsequently appear that the same has been stolen or that any endorsement thereon has been forged and the remittance or transfer from the bank account of the Company (or the bank account of any agent or nominee on behalf of the Company) of the relevant sum shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other moneys payable or property distributable in respect of the shares held by such joint holders. |
41.8 | All dividends or bonuses unclaimed for one (1) year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. Any dividend or bonuses unclaimed after a period of six (6) years from the date of declaration may be forfeited by the Board and if so forfeited, shall revert to the Company. The payment by the Board of any unclaimed dividend or other sums payable on or in respect of a share into a separate account shall not constitute the Company a trustee in respect thereof. |
41.9 |
Whenever the Board, or the Company by ordinary resolution of the Members, has resolved that a dividend be paid or declared, the Board may, subject to the Act, further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind and in particular of paid up shares, debentures or warrants to subscribe securities of the Company or any other company, or in any one or more of such ways, and where any difficulty arises in regard to the distribution the Board may settle the same as it thinks expedient, and in particular may disregard fractional entitlements or round the same up or down, and may fix the value for distribution of such specific assets, or any part thereof, and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all parties, and may vest any such specific assets in trustees as may seem expedient to the Board and may appoint any person to sign any requisite instruments of transfer and other documents on behalf of the persons entitled to the dividend, and such appointment shall be effective and binding on the Members. The Board may resolve that no such assets shall be made available to Members with registered addresses in any particular territory or territories where, in the absence of a registration statement or other special formalities, such distribution of assets would or might, in the opinion of the Board, be unlawful or impracticable and in such event the only entitlement of the Members aforesaid shall be to receive cash payments as aforesaid. |
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Members affected as a result of the foregoing sentence shall not be or be deemed to be a separate class of Members for any purpose whatsoever.
41.10 | 41.10.1 Whenever the Board, or the Company by ordinary resolution of the Members, has resolved that a dividend be paid or declared on any class of the share capital of the Company, the Board may, subject to the Act, further resolve either: |
(a) | that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the Members entitled thereto will be entitled to elect to receive such dividend (or part thereof if the Board so determines) in cash in lieu of such allotment. In such case, the following provisions shall apply: |
(i) | the basis of any such allotment shall be determined by the Board; |
(ii) | the Board, after determining the basis of allotment, shall give not less than ten (10) days Notice to the holders of the relevant shares of the right of election accorded to them and shall send with such notice forms of election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms of election must be lodged in order to be effective; |
(iii) | the right of election may be exercised in respect of the whole or part of that portion of the dividend in respect of which the right of election has been accorded; and |
(iv) | the dividend (or that part of the dividend to be satisfied by the allotment of shares as aforesaid) shall not be payable in cash on shares in respect whereof the cash election has not been duly exercised (the non-elected shares) and in satisfaction thereof shares of the relevant class shall be issued credited as fully paid up to the holders of the non-elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalise and apply out of any part of the undivided profits of the Company (including profits carried and standing to the credit of any reserves or other special account, share premium account or capital redemption reserve) as the Board may determine, such sum as may be required to pay up in full the appropriate number of shares of the relevant class for allotment and distribution to and amongst the holders of the non-elected shares on such basis; or |
(b) | that the Members entitled to such dividend shall be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit. In such case, the following provisions shall apply: |
(i) | the basis of any such allotment shall be determined by the Board; |
(ii) | the Board, after determining the basis of allotment, shall give not less than ten (10) days Notice to the holders of the relevant shares of the right of election accorded to them and shall send with such notice forms of election and specify the procedure to be followed and the place at which and the latest date and time by which duly completed forms of election must be lodged in order to be effective; |
(iii) | the right of election may be exercised in respect of the whole or part of that portion of the dividend in respect of which the right of election has been accorded; and |
(iv) |
the dividend (or that part of the dividend in respect of which a right of election has been accorded) shall not be payable in cash on shares in respect |
35
whereof the share election has been duly exercised (the elected shares) and in lieu thereof shares of the relevant class shall be issued credited as fully paid up to the holders of the elected shares on the basis of allotment determined as aforesaid and for such purpose the Board shall capitalise and apply out of any part of the undivided profits of the Company (including profits carried and standing to the credit of any reserves or other special account, share premium account or capital redemption reserve) as the Board may determine, such sum as may be required to pay up in full the appropriate number of shares of the relevant class for allotment and distribution to and amongst the holders of the elected shares on such basis.
41.10.2 | (a) The shares issued pursuant to the provisions of Clause 41.10.1 shall rank pari passu in all respects with shares of the same class (if any) then in issue save only as regards participation in the relevant dividend or in any other distributions, bonuses or rights paid, made, declared or announced prior to or contemporaneously with the payment or declaration of the relevant dividend unless, contemporaneously with the announcement by the Board of their proposal to apply the provisions of sub-paragraph (a) or (b) of this Clause 41.10.2 in relation to the relevant dividend or contemporaneously with their announcement of the distribution, bonus or rights in question, the Board shall specify that the shares to be issued pursuant to the provisions of Clause 41.10.1 shall rank for participation in such distribution, bonus or rights. |
(b) | The Board may do all acts and things considered necessary or expedient to give effect to any capitalisation pursuant to the provisions of Clause 41.10.1, with full power to the Board to make such provisions as it thinks fit in the case of shares becoming distributable in fractions (including provisions whereby, in whole or in part, fractional entitlements are aggregated and sold and the net proceeds distributed to those entitled, or are disregarded or rounded up or down or whereby the benefit of fractional entitlements accrues to the Company rather than to the Members concerned). The Board may authorise any person to enter into on behalf of all Members interested, an agreement with the Company providing for such capitalisation and matters incidental thereto and any agreement made pursuant to such authority shall be effective and binding on all concerned. |
41.10.3 | The Company may upon the recommendation of the Board by ordinary resolution resolve in respect of any one particular dividend of the Company that notwithstanding the provisions of Clause 41.10.1 a dividend may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment. |
41.10.4 | The Board may on any occasion determine that rights of election and the allotment of shares under Clause 41.10.1 shall not be made available or made to any shareholders with registered addresses in any territory where, in the absence of a registration statement or other special formalities, the circulation of an offer of such rights of election or the allotment of shares would or might, in the opinion of the Board, be unlawful or impracticable, and in such event the provisions aforesaid shall be read and construed subject to such determination. Members affected as a result of the foregoing sentence shall not be or be deemed to be a separate class of Members for any purpose whatsoever. |
41.10.5 |
Any resolution declaring a dividend on shares of any class, whether a resolution of the Company in a Members meeting or a resolution of the Board, may specify that the same shall be payable or distributable to the persons registered as the holders of such |
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shares at the close of business on a particular date, notwithstanding that it may be a date prior to that on which the resolution is passed, and thereupon the dividend shall be payable or distributable to them in accordance with their respective holdings so registered, but without prejudice to the rights inter se in respect of such dividend of transferors and transferees of any such shares. The provisions of this Clause 41 shall mutatis mutandis apply to bonuses, capitalisation issues, distributions of realised capital profits or offers or grants made by the Company to the Members.
42. | RESERVES |
42.1 | 42.1.1 The Board shall establish an account to be called the share premium account and shall carry to the credit of such account from time to time a sum equal to the amount or value of the premium paid on the issue of any share in the Company. Unless otherwise provided by the provisions of this Constitution, the Board may apply the share premium account in any manner permitted by the Law. The Company shall at all times comply with the provisions of the Law in relation to the share premium account. |
42.1.2 | Before recommending any dividend, the Board may set aside out of the profits of the Company such sums as it determines as reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the Company may be properly applied and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time think fit and so that it shall not be necessary to keep any investments constituting the reserve or reserves separate or distinct from any other investments of the Company. The Board may also without placing the same to reserve carry forward any profits which it may think prudent not to distribute. |
43. | CAPITALISATION |
43.1 | The Company may, upon the recommendation of the Board, at any time and from time to time pass an ordinary resolution to the effect that it is desirable to capitalise all or any part of any amount for the time being standing to the credit of any reserve or fund (including a share premium account and capital redemption reserve and the profit and loss account) whether or not the same is available for distribution and accordingly that such amount be set free for distribution among the Members or any class of Members who would be entitled thereto if it were distributed by way of dividend and in the same proportions, on the footing that the same is not paid in cash but is applied either in or towards paying up the amounts for the time being unpaid on any shares in the Company held by such Members respectively or in paying up in full shares, debentures or other obligations of the Company which are to be issued and distributed credited as fully paid up among such Members, or partly in one way and partly in the other, and the Board shall give effect to such resolution provided that, for the purposes of this Clause 43.1, a share premium account and any capital redemption reserve or fund representing unrealised profits, may be applied only in paying up in full shares of the Company to be issued to such Members credited as fully paid. |
43.2 |
Subject to the Act, the Board may settle as it considers appropriate, any difficulty arising in regard to any distribution under the last preceding Clause 43.1 and in particular may authorise any person to sell and transfer any fractions or may resolve that the distribution should be as nearly as may be practicable in the correct proportion but not exactly so or may ignore fractions altogether, and may determine that cash payments shall be made to any Members in order to adjust the rights of all parties, as may seem expedient to the Board. The Board may appoint any person to sign on behalf of the persons entitled to participate in the distribution any contract |
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necessary or desirable for giving effect thereto and such appointment shall be effective and binding upon the Members.
44. | ACCOUNTING RECORDS |
44.1 | The Board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the Law or necessary to give a true and fair view of the Companys affairs and to explain its transactions. |
44.2 | The accounting records shall be kept at the Office or, at such other place or places as the Board decides and shall always be open to inspection by the Directors. No Member (other than a Director) shall have any right of inspecting any accounting record or book or document of the Company except as conferred by law or authorised by the Board or the Company by ordinary resolution of the Members. |
44.3 | Subject to Clause 44.4, a printed copy of the Directors report, accompanied by the balance sheet and profit and loss account, including every document required by law to be annexed thereto, made up to the end of the applicable financial year and containing a summary of the assets and liabilities of the Company under convenient heads and a statement of income and expenditure, together with a copy of the Auditors report, shall be sent to each person entitled thereto at least ten (10) days before the date of the Members meeting and laid before the Company at the annual meeting held in accordance with Clause 17.1 provided that this Clause 44.3 shall not require a copy of those documents to be sent to any person whose address the Company is not aware or to more than one of the joint holders of any shares or debentures. |
44.4 | Subject to due compliance with all applicable Statutes, rules and regulations, including, without limitation, the rules of the Designated Stock Exchange, and to obtaining all necessary consents, if any, required thereunder, the requirements of Clause 44.3 shall be deemed satisfied in relation to any person by sending to the person in any manner not prohibited by the Statutes, a summary financial statement derived from the Companys annual accounts and the directors report which shall be in the form and containing the information required by applicable laws and regulations, provided that any person who is otherwise entitled to the annual financial statements of the Company and the directors report thereon may, if he so requires by notice in writing served on the Company, demand that the Company sends to him, in addition to a summary financial statement, a complete printed copy of the Companys annual financial statement and the directors report thereon. |
44.5 | The requirement to send to a person referred to in Clause 44.3 the documents referred to in that Clause or a summary financial report in accordance with Clause 44.4 shall be deemed satisfied where, in accordance with all applicable Statutes, rules and regulations, including, without limitation, the rules of the Designated Stock Exchange, the Company publishes copies of the documents referred to in Clause 44.3 and, if applicable, a summary financial report complying with Clause 44.4, on the Companys computer network or via the Internet or in any other permitted manner, and that person has agreed or is deemed to have agreed to treat the publication or receipt of such documents in such manner as discharging the Companys obligation to send to him a copy of such documents. |
45. | AUDIT |
45.1 | Subject to applicable law and rules of the Designated Stock Exchange: |
45.1.1 |
At the annual meeting or at a subsequent special meeting in each year, the Members shall appoint an auditor to audit the accounts of the Company and such auditor shall |
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hold office until the Members appoint another auditor. Such auditor may be a Member but no Director or officer or employee of the Company shall, during his continuance in office, be eligible to act as an auditor of the Company.
45.1.2 | The Members may, at any annual or special meeting convened and held in accordance with this Constitution, by special resolution remove the Auditor at any time before the expiration of his term of office and shall by ordinary resolution at that meeting appoint another Auditor in his stead for the remainder of his term. |
45.2 | Subject to the Law, the accounts of the Company shall be audited at least once in every year. |
45.3 | The remuneration of the Auditor shall be fixed by the Company by ordinary resolution of the Members or in such manner as the Members may determine. |
45.4 | If the office of auditor becomes vacant by the resignation or death of the Auditor, or by his becoming incapable of acting by reason of illness or other disability at a time when his services are required, the Board may appoint an Auditor to fill the vacancy and determine the remuneration of such Auditor. |
45.5 | The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto; and he may call on the Directors or officers of the Company for any information in their possession relating to the books or affairs of the Company. |
45.6 | The statement of income and expenditure and the balance sheet provided for by this Constitution shall be examined by the Auditor and compared by him with the books, accounts and vouchers relating thereto; and he shall make a written report thereon stating whether such statement and balance sheet are drawn up so as to present fairly the financial position of the Company and the results of its operations for the period under review and, in case information shall have been called for from Directors or officers of the Company, whether the same has been furnished and has been satisfactory. The financial statements of the Company shall be audited by the Auditor in accordance with internationally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in an annual or special meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than Mauritius. If so, the financial statements and the report of the Auditor should disclose this fact and name such country or jurisdiction. |
46. | NOTICES |
46.1 |
Any Notice or document, whether or not, to be given or issued under this Constitution from the Company to a Member shall be in writing or by cable, telex, facsimile transmission message or electronic mail (provided that in the case of electronic mail, the Member has consented in writing to Notices and documents from the Company, the depository or any other person sending the relevant Notice(s) and/or document(s) being sent to such Member by electronic mail and such Member has provided the Company, the Secretary or the depository (as the case may be) with an electronic mail address to which Notices and documents may be sent), and any such Notice and document may be served or delivered by the Company on or to any Member either personally or by sending it through the post in a prepaid envelope addressed to such Member at his registered address as appearing in the Register or at any other address supplied by him to the Company for the purpose or, as the case may be, by transmitting it to any such address or transmitting it to any telex or facsimile transmission number or email address supplied by him to the Company for the giving of Notice to him or which the person transmitting the notice reasonably and bona fide believes at the relevant time will result in the |
39
Notice being duly received by the Member or, to the extent permitted by the applicable laws, by placing it on the Companys website and giving to the member a notice stating that the notice or other document is available there (a notice of availability). The notice of availability may be given to the Member by any of the means set out above. In the case of joint holders of a share all notices shall be given to that one of the joint holders whose name stands first in the Register and notice so given shall be deemed a sufficient service on or delivery to all the joint holders.
46.2 | Any Notice or other document: |
46.2.1 | if served or delivered by post, shall where appropriate be sent by airmail and shall be deemed to have been served or delivered five (5) days following that on which the envelope containing the same, properly prepaid and addressed, is put into the post; in proving such service or delivery it shall be sufficient to prove that the envelope or wrapper containing the notice or document was properly addressed and put into the post and a certificate in writing signed by the Secretary or other officer of the Company or other person appointed by the Board that the envelope or wrapper containing the notice or other document was so addressed and put into the post shall be conclusive evidence thereof; |
46.2.2 | if served or delivered in any other manner contemplated by this Constitution, shall be deemed to have been served or delivered at the time of personal service or delivery or, as the case may be, at the time of the relevant despatch or transmission; and in proving such service or delivery a certificate in writing signed by the Secretary or other officer of the Company or other person appointed by the Board as to the act and time of such service, delivery, despatch or transmission shall be conclusive evidence thereof; and |
46.2.3 | may be given to a Member in the English language or such other language as may be approved by the Directors, subject to due compliance with all applicable Statutes, rules and regulations. |
46.3 | 46.3.1 Any Notice or other document delivered or sent by post to or left at the registered address of any Member in pursuance of this Constitution shall, notwithstanding that such Member is then dead or bankrupt or that any other event has occurred, and whether or not the Company has notice of the death or bankruptcy or other event, be deemed to have been duly served or delivered in respect of any share registered in the name of such Member as sole or joint holder unless his name shall, at the time of the service or delivery of the notice or document, have been removed from the Register as the holder of the share, and such service or delivery shall for all purposes be deemed a sufficient service or delivery of such Notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share. |
46.3.2 | A notice may be given by the Company to the person entitled to a share in consequence of the death, mental disorder or bankruptcy of a Member by sending it through the post in a prepaid letter, envelope or wrapper addressed to him by name, or by the title of representative of the deceased, or trustee of the bankrupt, or by any like description, at the address, if any, supplied for the purpose by the person claiming to be so entitled, or (until such an address has been so supplied) by giving the notice in any manner in which the same might have been given if the death, mental disorder or bankruptcy had not occurred. |
46.3.3 | Any person who by operation of law, transfer or other means whatsoever shall become entitled to any share shall be bound by every notice in respect of such share which prior to his name and address being entered on the Register shall have been duly given to the person from whom he derives his title to such share. |
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47. | SIGNATURES |
47.1 | For the purposes of this Constitution, a cable or telex or facsimile message purporting to come from a holder of shares or, as the case may be, a Director, or, in the case of a corporation which is a holder of shares from a director or the secretary thereof or a duly appointed attorney or duly authorised representative thereof for it and on its behalf, shall in the absence of express evidence to the contrary available to the person relying thereon at the relevant time be deemed to be a document or instrument in writing signed by such holder or Director in the terms in which it is received. |
48. | WINDING UP |
48.1 | 48.1.1 The Board shall have power in the name and on behalf of the Company to present a petition to the court for the Company to be wound up. |
48.1.2 | A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution. |
48.2 | 48.2.1 Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares (i) if the Company shall be wound up and the assets available for distribution amongst the Members of the Company shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed pari passu amongst such members in proportion to the amount paid up on the shares held by them respectively and (ii) if the Company shall be wound up and the assets available for distribution amongst the Members as such shall be insufficient to repay the whole of the paid-up capital such assets shall be distributed so that, a nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. |
48.2.2 | If the Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Law, divide among the Members in specie or kind the whole or any part of the assets of the Company and whether or not the assets shall consist of properties of one kind or shall consist of properties to be divided as aforesaid of different kinds, and may for such purpose set such value as he deems fair upon any one or more class or classes of property and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of the Members as the liquidator with the like authority shall think fit, and the liquidation of the Company may be closed and the Company dissolved, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability. |
49. | INDEMNITY |
49.1 |
49.1.1 Subject to any indemnification agreement which may be entered into by the Company and the provisions of and so far as may be permitted by Law, every Director, Secretary or other officer for the time being of the Company and the liquidator or trustees (if any) for the time being acting in relation to any of the affairs of the Company and every one of them shall be entitled to be indemnified by the Company against all costs, charges, losses, expenses and liabilities incurred or sustained by them or any of them in the execution and discharge of their duties in their respective offices or in relation thereto, including any liability incurred by him in defending any proceedings, civil or criminal, which relate to anything done or omitted or |
41
alleged to have been done or omitted by him as a director, officer or employee of the Company and in which judgment is given in his favour (or the proceedings otherwise disposed of without any finding or admission of any material breach of duty on his part) or in which he is acquitted or in connection with any application under any statute for relief from liability in respect of any such act or omission in which relief is granted to him by the court; PROVIDED THAT this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of said persons.
49.1.2 | Without prejudice to the generality of the foregoing, no Director, Secretary or other officer of the Company shall be liable for the acts, receipts, neglects or defaults of any other Director or officer of the Company or for joining in any receipt or other act for conformity or for any loss or expense to the Company through the insufficiency or deficiency of title to any property acquired by order of the Directors for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Company shall be invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person with whom any moneys, securities or effects shall be deposited or left or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto unless the same shall happen through his own fraud, negligence, wilful default, breach of duty or breach of trust. |
49.1.3 | The Company may effect insurance for a Director or employee of the Company or a related company to the full extent permitted under section 161 of the Act. For the purposes of this clause, Director includes: |
(a) | alternate directors; and |
(b) | a person to whom a power or duty of the Board has been directly delegated by the Board with that persons consent or acquiescence, or who exercises the power or duty with the consent or acquiescence of the Board. |
50. | AMENDMENT TO CONSTITUTION AND NAME OF COMPANY |
50.1 | No provision of this Constitution shall be rescinded, altered or amended and no new provision of this Constitution shall be made until the same has been approved by a special resolution of the Members. A special resolution shall be required to alter the provisions of this Constitution or to change the name of the Company. |
51. | INFORMATION |
51.1 | No Member shall be entitled to require discovery of or any information respecting any detail of the Companys trading or any matter which is or may be in the nature of a trade secret or secret process which may relate to the conduct of the business of the Company and which in the opinion of the Directors it will be inexpedient in the interests of the members of the Company to communicate to the public. |
52. | NOTIFICATION OF SHAREHOLDING |
52.1 | Each Director shall, upon his appointment to the Board, give an undertaking to the Company that, for so long as he remains a Director, he shall forthwith give the Secretary notice in writing of the particulars of the shares beneficially owned by him at the time of his appointment and of any change in such particulars (including the circumstances of any such change). |
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52.2 | Each Member shall, upon becoming a substantial shareholder of the Company, give an undertaking to the Company that, for so long as he remains as a substantial shareholder of the Company, he shall give the Secretary notice in writing of the particulars of the shares in which he has an interest at the time of his becoming a substantial shareholder or of any change in such particulars (including the circumstances of any such change) within 48 hours of such time or change (as the case may be), provided that he shall only be required to give notice of a change in the percentage level of his interests in the shares under this Clause 52.2 where there is a change of one per cent. (1%) or more in the percentage level of his shareholding interest in the relevant class of shares in the Company. For the purpose of this Clause 52.2, the term substantial shareholder shall have the same meaning ascribed to it in Section 2 (1) of the Act. The requirement to give notice under this Clause 52.2 shall not apply to a depository. |
53. | ADDITIONAL RESTRICTIONS |
53.1 | For so long as International Finance Corporation and IFC GIF Investment Company I together hold at least 5% (five percent) of the share capital of the Company, the decisions on the following matters shall not be taken and/or implemented by the Company unless approved by way of a special resolution of shareholders: |
53.1.1 | amendment to the articles of association or memorandum of association of Azure Power India Private Limited and its subsidiaries, provided that any amendment to the articles of association or memorandum of association of the Companys subsidiaries (other than Azure Power India Private Limited) shall not require approval of the shareholders of the Company if such amendment is carried out pursuant to a project finance, working capital limits, non-fund based facilities, mezzanine financing (if the amount raised is less than 20% of the paid-up share capital of the Company) or any other financing arrangements (if the amount raised is less than 20% of the paid-up share capital of the Company) raised for the Companys subsidiaries (other than Azure Power India Private Limited) that have been approved by the Board or Board delegated committee of the Company; |
53.1.2 | disposal or sale, in a single transaction or a series of related transactions, of more than 50% of the Companys assets (on a consolidated basis), or entry into a single transaction or a series of related transactions where the Company will incur obligations or liabilities (on a consolidated basis) the value of which is more than 50% of the Companys assets (on a consolidated basis) before such transaction or series of related transactions; |
53.1.3 | any change in the business of the Company or its subsidiaries, such business being understood to mean and include the activities that Azure Power India Private Limited is authorized to carry out under the Main Objects clause of the memorandum of association of Azure Power India Private Limited in effect on 22 July 2015; and |
53.1.4 | any amendment to the ESOP plan approved by the Board, except as would not be a material revision as such term is defined in Section 303A.08 of the New York Stock Exchange Listed Company Manual. |
53.2 | For so long as International Finance Corporation and/or IFC GIF Investment Company I hold any equity shares of the Company, the Company shall not, in a single transaction, issue equity shares or share equivalents that are more than 10% (ten percent) of the share capital of the Company, unless approved by the shareholders of the Company by way of an ordinary resolution. |
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CERTIFICATION BY APPLICANT(S)
We, the undersigned applicant(s) for filing this Constitution, hereby certify that this document is the Constitution of the Company adopted pursuant to a special resolution of the Members of the Company dated [●] 2015 and effective immediately upon the completion of the Companys initial public offering of equity shares on [●] 2015
For and on behalf of AAA Global Services Ltd.
Company Secretary
Represented by [●]
44
Exhibit 5.1
[FORM OF OPINION TO BE RECEIVED FROM COUNSEL]
Azure Power Global Limited | Email mmoller@applebyglobal.com | |||||
1st Floor, The Exchange | mkoomar@applebyglobal.com | |||||
18 Cybercity | ||||||
Ebene | Direct Dial +230 203 4301 | |||||
Mauritius | ||||||
Tel +230 203 4300 | ||||||
Fax +230 210 8792 | ||||||
Your Ref | ||||||
Appleby Ref 429640.0001 | ||||||
[Date | ] | |||||
Dear Sirs |
Mauritius Office 9th Floor Medine Mews La Chaussée Street Port Louis Republic of Mauritius
Tel +230 203 4300
applebyglobal.com |
INTRODUCTION
This opinion as to Mauritius law is addressed to you in connection with the filing by Azure Power Global Limited, a public company limited by shares incorporated under the laws of Mauritius (the Company ), of the Companys registration statement on Form F-1, including all amendments and supplements thereto, filed with the U.S. Securities and Exchange Commission (the Registration Statement ), and the offering by the Company and its selling shareholder of equity shares of par value US$0.01 each in the capital of the Company of which certain shares are being offered by the Company and certain shares are being offered by the Companys selling shareholder (collectively, the Shares ).
OUR REVIEW |
|
For the purposes of giving this opinion we have examined and relied upon the documents listed in Part 1 of Schedule 1 (the Documents ). | ||
For the purposes of giving this opinion we also have carried out the Company Search described in Part 2 of Schedule 1. | ||
We have not made any other enquiries concerning the Company and in particular we have not investigated or verified any matter of fact or opinion (whether set out in any of the Documents or elsewhere) other than as expressly stated in this opinion. | ||
Unless otherwise defined herein, capitalised terms have the meanings assigned to them in Schedule 1. | ||
LIMITATIONS | ||
Our opinion is limited to, and should be construed in accordance with, the laws of Mauritius at the date of this opinion. We express no opinion on the laws of any other jurisdiction. |
Business Registration Number: P10018768 Appleby (JV) Ltd & Cie, trading under the name of Appleby, is a joint law venture firm registered under the Law Practitioners Act 1984. |
Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
This opinion is strictly limited to the matters stated in it and does not extend to, and is not to be extended by implication, to any other matters. We express no opinion on the commercial implications of the Documents or whether they give effect to the commercial intentions of the parties. | ||||
This opinion is issued solely for the purposes of filing the Registration Statement and the offering of the Shares by the Company and is not be relied upon in respect of any other matter. We consent to the filing of this opinion as an exhibit to the Registration Statement of the Company. | ||||
We also consent to the reference to our Firm under the captions Enforceability of Civil Liabilities, Taxation and Legal Matters in the Registration Statement. | ||||
ASSUMPTIONS AND RESERVATIONS | ||||
We give the following opinions on the basis of the assumptions set out in Schedule 2 ( Assumptions ), and subject to the reservations set out in Schedule 3 ( Reservations ). | ||||
OPINIONS | ||||
1. |
The Company is a Global Business Licence company incorporated with limited liability and validly existing under the laws of Mauritius and is a separate legal entity. The Company is in good standing as evidenced by the Certificate of Current Standing issued by the Registrar of Companies. | |||
2. |
The Company is a holder of a Category 1 Global Business Licence issued by the Financial Services Commission of Mauritius. | |||
3. |
Based solely on the Directors Certificate, when issued and paid for as contemplated by the Registration Statement, the Shares will be validly issued, fully paid and non-assessable (meaning that the security holder (i.e. the holder of the shares) would not be liable, solely because of security holder status, for additional assessments or calls on the shares by the registrant of the shares or creditors of the Company). | |||
4. |
The statements made in most recent Registration Statement and prospectus under the caption Taxation, insofar as they purport to constitute summaries of matters of Mauritius law and regulations or legal conclusions with respect thereto, constitute the opinion of Appleby. | |||
Yours faithfully | ||||
|
||||
Appleby |
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Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
SCHEDULE 1
Part 1
The Documents
1. |
A copy the Registration Statement. | |||
2. |
A certified copy of the certificate of incorporation of the Company, dated 2 February 2015. | |||
3. |
A copy of the constitution of the Company, dated 20 July 2015. | |||
Items 1 -3 collectively referred to as the Constitutional Documents . | ||||
4. |
A certified copy of the Global Business Licence bearing the name of the Company, dated 2 February 2015. | |||
5. | A certified copy of the Certificate of Current Standing issued by the Registrar of Companies in respect of the Company. | |||
6. | A certified copy of the minutes of a meeting of the board of directors of the Company held on 26 February 2015 (the Resolutions ). | |||
7. | A certified copy of the Register of Directors dated 10 December 2015. | |||
8. | A certified copy of the Register of Members dated 3 December 2015. | |||
9. | A Certificate of Incumbency issued by the company secretary of the Company in respect of the Company dated 15 December 2015. | |||
10. | A certificate from a Director of the Company dated 16 June 2015 (the Directors Certificate ). | |||
11. | A copy of the results of the Company Search. |
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. |
Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
Part 2 | ||||
Searches | ||||
1. |
A search of the entries and filings shown in respect of the Company on the file of the Company maintained in the Register of Companies at the office of the Registrar of Companies in Port Louis, Mauritius as revealed by a search conducted on 15 December 2015 ( Company Search ). |
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Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
SCHEDULE 2 | ||||
Assumptions | ||||
We have assumed: | ||||
that: | ||||
(i) the original documents of all documents examined in connection with this opinion are authentic and complete; |
||||
(ii) the authenticity, completeness and conformity to original documents of all documents submitted to us as copies; and |
||||
(iii) that each of the documents received by electronic means is complete, intact and in conformity with the transmission as sent; |
||||
2. |
that there has been no change to the information contained in the Constitutional Documents; | |||
3. |
that the signatures and seals on all documents and certificates submitted to us as originals or copies of executed originals are genuine and authentic, and the signatures on all documents executed by the Company are the signatures of the persons authorised to execute the documents by the Company; | |||
4. |
that where incomplete documents, drafts or signature pages only have been supplied to us for the purposes of issuing this opinion, that the original documents have been completed and correspond in all material respects with the last version of the relevant documents examined by us prior to giving our opinion; | |||
5. |
that the Documents do not differ in any material respects from any drafts of the same which we have examined and upon which this opinion is based; | |||
6. |
the due execution and delivery of the Documents by each of the parties thereto (other than the Company under Mauritius law); | |||
7. | that, insofar as any obligation under the Documents is to be performed in any jurisdiction outside of Mauritius, its performance will be legal and effective in accordance with the law of any jurisdiction to which they are subject or in which they are respectively constituted and established; | |||
8. | the truth, accuracy and completeness of all representations and warranties or statements of fact or law (other than as to the laws of Mauritius and those matters upon which we have expressly opined) made in the Documents and any correspondence submitted to us; |
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Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
9. |
the accuracy, completeness and currency of the records and filing systems maintained at the public offices where we have searched or enquired or have caused searches or enquiries to be conducted, that such search and enquiry did not fail to disclose any information which had been filed with or delivered to the relevant body but had not been processed at the time when the search was conducted and the enquiries were made, and that the information disclosed by the Company Search is accurate and complete in all respect and such information has not been materially altered since the date and time thereof; | |||
10. |
that | |||
(i) the Documents are in the form of the documents approved in the Resolutions, |
||||
(ii) any meetings at which Resolutions were passed were duly convened and had a constituted quorum present and voting throughout and any unanimous resolutions passed in writing were adopted in accordance with the law and the Constitutional Documents, |
||||
(iii) all interests of the directors on the subject matter of the Resolutions, if any, were declared and disclosed in accordance with the law and Constitutional Documents, |
||||
(iv) the Resolutions and any Power of Attorney have not been revoked, amended or superseded, in whole or in part, and remain in full force and effect at the date of this opinion; and |
||||
(v) the Directors of the Company have concluded that the entry by the Company into the Documents and such other documents approved by the Resolutions and the transactions contemplated thereby are bone fide in the best interests of the Company. |
||||
11. |
that the Certificate of Incumbency accurately reflects the names of all Directors and Officers of the Company as at the date the Resolutions were passed or adopted, the date the Documents were executed and as at the date hereof; | |||
12. |
that there is no matter affecting the authority of the Directors to effect entry by the Company into the Documents including breach of duty, lack of good faith, not disclosed by the Constitutional Documents or the Resolutions, which would have any adverse implications in relation to the opinions expressed in this opinion; | |||
13. |
that the Company has entered into its obligations under the Documents in good faith for the purpose of carrying on its business and that, at the time it did so, there were reasonable grounds for believing that the transactions contemplated by the Documents would benefit the Company; |
6
. |
Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
14. |
that no resolution to voluntarily wind up the Company has been adopted by the members and no event of a type which is specified in the Constitutional Documents as giving rise to the winding up of the Company (if any) has in fact occurred; and | |||
15. |
that there are no matters of fact or law (excluding matters of Mauritius law) affecting the enforceability of the Documents that have arisen since the execution of the Documents which would affect the opinions expressed herein. | |||
16. |
that there has been no changes to the statements made in the Directors Certificate as at the date of this opinion. |
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Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
SCHEDULE 3 | ||
Reservations |
Our opinion is subject to the following: | ||||||
1. Enforcement: | there is a way of ensuring that each party performs an agreement or that there are remedies available for breach. Notwithstanding that the obligations established by the Documents are obligations which courts of Mauritius would generally enforce, they may not necessarily be capable of enforcement in all circumstances in accordance with their terms. In particular, but without limitation: | |||||
(i) | enforcement and priority may be limited by laws relating to bankruptcy, insolvency, reorganisation, liquidation, court schemes, schemes of arrangements, moratoriums or other laws of general application relating to, or affecting the rights of, creditors generally; | |||||
(ii) | enforcement may be limited by the principles of unjust enrichment or by general principles of equity (for example equitable remedies such as the grant of an injunction or an order for specific performance may not be available where liquidated damages are considered an adequate remedy); | |||||
(iii) | claims may become barred by prescription or may be or become subject to defences of set-off, counterclaim, estoppel and similar defences; | |||||
(iv) | obligations to be performed outside Mauritius may not be enforceable in Mauritius to the extent that performance would be illegal or contrary to public policy under the laws of that foreign jurisdiction; | |||||
(v) | enforcement may be limited to the extent that matters which we have expressly assumed in this opinion will be done, have not been done; | |||||
(vi) | the enforcement of the obligations of the parties to the Documents may be limited by the law applicable to obligations held to have been frustrated by events happening after their execution; | |||||
(vii) | enforcement of obligations may be invalidated by reason of fraud, duress, misrepresentation or undue influence; | |||||
(viii) | where the performance of payment obligations is contrary to the exchange control regulations of any country in whose currency such amounts are payable, such obligations may not be enforceable in Mauritius; |
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Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
(ix) any agreement that the Company will not exercise the powers reserved for exercise by the shareholders of the Company may constitute an unlawful fetter on those reserved powers; |
||||
(x) matters of procedure on enforcement of the Documents and forum conveniens will be governed by and determined in accordance with the lex fori . |
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2. |
Waiver of provisions of law: We express no opinion as the enforceability of any present or future waiver of any provision of law (whether substantive or procedural) or of any right or remedy which might otherwise be available presently or in the future under the Documents. | |||
3. |
Penalties: Any provision as to the payment of additional money consequent on the breach of any provision of a Document by any person expressed to be a party to it, whether expressed by way of penalty, additional or default interest, liquidated damages or otherwise, may be unenforceable if it could be established that such additional payment constitutes a penalty rather than a compensatory amount. | |||
4. |
Severability: Severability provisions contained in the Documents may not be binding and the question of whether or not provisions may be severed would be determined by the Mauritius courts at their discretion, having regard to such matters as whether a particular severance would accord with public policy or involve the courts in making a new contract for the parties. | |||
5. |
Determination: Notwithstanding the provisions of the Documents, a determination, designation, calculation or certificate of any party to the Documents, as to any matter provided for in such Documents might, in certain circumstances, be held in the Mauritius courts not to be final, conclusive or binding (for example, if it could be shown to have been fraudulent or erroneous on its face, manifestly inaccurate, made on an unreasonable or arbitrary basis or not to have been reached in good faith) and the Documents will not necessarily escape judicial enquiry into the merit of any claim by any party in that respect. | |||
6. |
Discretion: Where a party to the Documents is vested with a discretion or may determine a matter in its opinion or is given the right to determine a conclusive calculation or determination, the Mauritius courts, if called upon to consider the question, may require that such discretion be exercised reasonably or that such opinion be based upon reasonable grounds or may determine that such right is not finally binding. |
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Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
7. |
Modification of documents: We express no view on any provision in any of the Documents requiring written amendments and waivers of any of the provisions of such Documents insofar as it suggests that oral or other modification, amendments or waivers could not be effectively agreed upon or granted by or between the parties or implied by the course of conduct of the parties. | |||
8. |
Limitations on liability: The effectiveness of any terms releasing or limiting a party from a liability or duty owed is limited by law. | |||
9. |
Jurisdiction: Where a Document provides for the submission to the exclusive or non-exclusive jurisdiction of the Mauritius courts, the court may decline to accept jurisdiction in any matter where: | |||
(i) it determines that some other jurisdiction is a more appropriate or convenient forum; |
||||
(ii) another court of competent jurisdiction has made a determination in respect of the same matter; or |
||||
(iii) litigation is pending in respect of the same matter in another jurisdiction. |
||||
10. |
Concurrent proceedings: Proceedings may be stayed in Mauritius if concurrent proceedings in respect of the same matter are or have been commenced in another jurisdiction. Notwithstanding any provision in the Documents that all disputes arising under or in connection with the Documents should be brought before the competent court in the jurisdiction specified in the Documents, the Mauritius courts have discretion to refuse to stay proceedings in Mauritius if it is satisfied that it is just and equitable to do so and may grant leave to serve Mauritius proceedings outside of Mauritius. | |||
11. |
Foreign law: Relevant foreign law will not be applied by the Mauritius courts if it is not pleaded and proved, is not a bona fide and lawful choice of law, or it would be contrary to public policy for that law to be applied. | |||
12. |
Costs: A Mauritius court may refuse to give effect to any provisions of a Document in respect of costs of litigation brought before the Mauritius court. | |||
13. |
Preferences: A transaction by a debtor, including the grant of a charge over any property or undertaking of the debtor, may be set aside by the Supreme Court of Mauritius on the application of the Official Receiver or a liquidator where it is a voidable preference and was made within 2 years immediately before adjudication or commencement of the winding up. A charge may not be set aside where it secures money actually advanced or paid, or the actual price or value of property sold or supplied, or any other valuable consideration given in good faith, by the charge holder to the debtor at the time when, or at any time after, the charge was given. A |
10
Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
charge or security may not be set aside where it is a substitute for an existing charge that was given by the debtor more than 2 years before the date of adjudication or the commencement of the winding up, except to the extent that (a) the amount secured by the substituted charge is greater than the amount that was secured by the existing charge; or (b) the value of the property subject to the substituted charge at the date of substitution was greater than the value of the property subject to the existing charge at that date. | ||||
14. |
Presumption of insolvency: A transaction by a debtor, including the grant of a charge over any property or undertaking of the debtor, that is made within 6 months immediately before the debtors adjudication or the commencement of the winding up is presumed, unless the contrary is proved, to be made at a time when the debtor is unable to pay his due debts. | |||
15. |
Good standing: the Company has received a Certificate of Current Standing issued by the Registrar of Companies. | |||
16. |
Major transactions: Where the board of directors deems a transaction a major transaction within the meaning of section 130 of the Companies Act, shareholder approval by way of special resolution is required. Section 130 of the Companies Act defines a major transaction as | |||
(a) the acquisition of, or an agreement to acquire, whether contingent or not, assets the value of which is more than 75 per cent of the value of the companys assets before the acquisition; |
||||
(b) the disposition of, or an agreement to dispose of, whether contingent or not, assets of the company the value of which is more than 75 per cent of the value of the companys assets before the disposition; or |
||||
(c) a transaction that has or is likely to have the effect of the company acquiring rights or interests or incurring obligations or liabilities the value of which is more than 75 per cent of the value of the companys assets before the transaction. |
||||
17. |
Directors Certificate: With respect to this opinion, we have relied upon the statements and representations made to us in the Directors Certificate provided to us and issued by a Director of the Company for the purposes of this opinion. We have made no independent verification of the matters referred to in the Directors Certificate, and we qualify our opinion to the extent that the statements or representations made in the Directors Certificate are not accurate in any respect. |
11
Bermuda ¡ British Virgin Islands ¡ Cayman Islands ¡ Guernsey ¡ Hong Kong ¡ Isle of Man ¡ Jersey ¡ London ¡ Mauritius ¡ Seychelles ¡ Shanghai ¡ Zurich |
Exhibit 10.1
Azure Power Global Limited
Azure Power Global Limited Employee Stock Option Plan 2015
Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
PREAMBLE
The Compensation Committee of Azure Power Global Limited formed to assist the Board of Directors in recommending to the Board for approval and/ or evaluating the compensation plans, policies, and programs to ensure that the compensation programs are designed to encourage high performance, promote accountability and assure that employee interests are aligned with the interests of the Companys shareholders.
In accordance with the above mentioned objective the Compensation Committee Charter, and by the powers conferred to the Compensation Committee, the Compensation Committee has discussed and drafted this Azure Power Global Limited Employee Stock Option Plan 2015 with an object to encourage high performance, promote accountability and align employees interests with the interests of the Companys shareholders, and to provide talented and critical executives with an opportunity to acquire an ownership interest in the Company and/or to provide incentive to such executive by granting, them an option to acquire the Shares in Company.
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
Contents | ||
Article 1 |
Name and objectives of the Plan | |
Article 2 |
Definitions and interpretations | |
Article 3 |
Implementation | |
Article 4 |
Effective date and Plan duration | |
Article 5 |
Administration and Compensation Committee | |
Article 6 |
Grant of Options | |
Article 7 |
Vesting of Options | |
Article 8 |
Exercise of Options | |
Article 9 |
Exit Options | |
Article 10 |
Terminal Conditions | |
Article 11 |
Non-Assignability | |
Article 12 |
Right of an Employee in Stock | |
Article 13 |
Terms and Conditions of Shares | |
Article 14 |
Eligibility | |
Article 15 |
Change in Capital Structure or Corporate Action | |
Article 16 |
Amendment or Termination of the Plan | |
Article 17 |
Others |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 1
NAME AND OBJECTIVES OF THE PLAN
1.1 | The Plan shall be called the Azure Power Global Limited Employee Stock Option Plan 2015 (Azure Power ESOP or the Plan). |
1.2 | This Plan has been adopted by the Board pursuant to a resolution passed at its meeting held on 20th July, 2015, read with the Special Resolution passed by the Company at the Shareholders Meeting held on 20th July, 2015. |
1.3 | The objectives of the Plan are: |
i) | To create a sense of ownership and participation amongst the employees; |
ii) | To provide means to enable the Company to attract and retain high quality human talent in the employment of the Company,; |
iii) | To enhance the compensation/reward and make it competitive. |
iv) | To achieve sustained growth of the Company and creation of shareholder value by aligning the interests of the employees with the long term interests of the Company; |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 2
DEFINITIONS AND INTERPRETATIONS
I) | Definitions: |
The terms defined in this Plan shall for the purposes of this Plan, have the meanings specified herein and terms not defined shall have the meanings as defined in the Companies Act 2001, or in any statute or re-enactments hereof, as the case may be.
2.1 | Applicable Law means the legal statutes, to the extent applicable to stock options, as applicable in Mauritius including, but not limited to the Companies Act 2001 and the rules/ guidelines/ notifications issued there under, and any modifications or re-enactments thereof. |
2.2 | Azure Power Global Limited Employee Stock Option Agreement (the Agreement) means the agreement between the Company and the grantee containing the terms and conditions specific to an individual employees stock options. The Azure Power Global Limited Employee Stock Option Agreement will however be subject to the terms and conditions of the Plan. |
2.3 | Board of Directors / Board means the Board of Directors of the Company for the time being and re-constituted and/or re-structured from time to time during the existence of this Plan and where the context so requires include the Board of Directors of the Holding Company and/or its Subsidiary Company. |
2.4 | Cashless Exercise means an arrangement facilitated by the company with or without an arrangement with a brokerage firm, wherein the Exercise Price is given as a loan to the employee with a written commitment from an employee to sell the shares immediately to recover the Exercise Price, tax and other incidental charges. The employee retains the balance, if any |
2.5 | Change in Capital Structure means a change in the capital structure of the Company as a result of reclassification of shares, splitting up of the face value of shares, sub-division of shares, issue of bonus shares, issue of rights shares, conversion of shares into other shares or securities and any other change in the rights or obligations in respect of shares. |
2.6 | Closing Date shall mean 10 years from date of approval of the Plan or finishing of all stocks allocated for employee stock options, whichever is earlier |
2.7 | Common Stock means the equity shares of the Company and includes any securities convertible into equity shares |
2.8 | Committee shall mean Compensation Committee as formed under the Companys Compensation Committee Charter. |
2.9 | Company means Azure Power Global Limited, a Company incorporated under the laws of the Republic of Mauritius (Mauritius) having its registered office at c/o AAA Global Services Ltd., 1st Floor, The Exchange 18 Cybercity, Ebene, Mauritius. |
2.10 | Compensation Committee means the Compensation Committee set up by the Company under Article 3. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
2.11 | Corporate Action means and includes one of the following events: |
i) | the merger, de-merger, spin-off, consolidation, amalgamation, sale of business, dissolution or other reorganization of the Company (except to a subsidiary) in which the shares are converted into or exchanged for: |
a) | a different class of securities of the Company; or |
b) | any securities of any other issuer; or |
c) | cash; or |
d) | other property. |
ii) | the sale, lease or exchange of all or substantially whole of the assets or undertaking of the Company to any other Company/entity (except subsidiary). |
iii) | the adoption by the shareholders of the Company of a Plan of liquidation, dissolution or winding up. |
2.12 | Disability shall mean Disability as defined in any applicable Agreement between the grantee and the Company or if there is no such Agreement or Disability is not defined therein, then a grantees becoming physically or mentally incapacitated so that he is therefore reasonably expected to be unable for a period of three (3) consecutive months or for an aggregate of six (6) months in any twelve (12) month period to perform his duties to the Company. |
2.13 | Employee means: |
i) | Any person employed by the Company in permanent employment of the Company including any Director of the Company, whether whole time or not; or |
ii) | Any employee in permanent employment of a holding or subsidiary including its Directors, whether whole time or not; or |
iii) | Any person as may be determined by the Compensation Committee pursuant to Article 5.3.4. |
2.14 | Employer means the Company, its Holding Company or any of its subsidiary companies. |
2.15 | Exercise in relation to an option means, submission of an application by the employee for transfer/ allotment of shares, in respect of the options vested in him under the Plan, along with the Exercise Price payable for the shares. |
2.16 | Exercise Period in relation to options means the period within which the option can be exercised i.e. the period commencing from the date of vesting of options and ending on the date after which options cannot be exercised. |
2.17 | Exercise Price means the price payable by the employee on the exercise of the options offered under a grant. This price will be determined by the Compensation Committee at the time of grant of options. |
2.18 | Fair Market Value (FMV) means: |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
Till the time shares of Azure Power Global Limited are not listed on a Recognized Stock Exchange, the value shall be:
i) | based on the value as existing at the last round of funding/ capital raise done by the Company; or |
ii) | as determined by the Independent appraisers, as appointed by the Compensation Committee, based upon the Companys accounts for the previous three financial years, the current book value per share of the Companys outstanding capital stock, the price at which shares of the Companys outstanding capital stock have previously been issued by the Company, the liquidation rights and other preferences to which the holders of those shares are entitled, the lack of marketability of the shares, and other factors that the Independent appraisers considers appropriate in good faith. |
Once the shares of the Company are listed on a recognised stock exchange, FMV would refer to the average of the opening and the closing price of the share on the date of valuation on the recognized stock exchange on which shares of the Company are listed.
If the shares are listed on more than one Recognized Stock Exchanges, the FMV shall be the average of opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in the share.
If, on the date of valuation of the option, there is no trading in the share on any recognized stock exchange, the FMV shall be -
i) | the closing price of the share on any recognised stock exchange on a date closest to the date of valuation of the option and immediately preceding such date; or |
ii) | the closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price, as on the date closest to the date of vesting of the option and immediately preceding such date, is recorded on more than one recognized stock exchange. |
2.19 | Grant means, any options granted pursuant to the Plan. |
2.20 | Grantee means the eligible employee to whom options are offered under the Plan by the employer in consultation with the Compensation Committee. |
2.21 | Grant Date means the date specified in the Azure Power Global Limited Option Agreement on which a grant is made to an employee by the Company. |
2.22 | Holding Company means a Holding Company of Azure Power Global Limited, as defined in the Companies Act 2001. |
2.23 | IPO means Initial Public Offer of the Companys shares resulting in a listing of the Shares on any Recognised Stock Exchange. |
2.24 | Option means the right, without any obligation, granted to an Employee to subscribe to shares or any resultant shares upon such terms and conditions as may be specified in the Plan. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
2.25 | Promoter means: |
i) | The person or persons who are instrumental in the formation of the Company or programme pursuant to which the Shares were offered to the public; |
ii) | The person or persons named in the offer document as promoter(s). Provided that a director or officer of the Company if he is acting as such only in the professional capacity will not be deemed to be a promoter. |
Explanation: Where the Promoter of a Company is a body corporate, the Promoter of that body corporate shall also be deemed to be a Promoter of the Company
2.26 | Resultant Shares means the Shares or other securities issued in lieu of the Shares of the Company, on any change in capital structure or on any Corporate Action as mentioned in this Plan. |
2.27 | Shares means the equity shares of the Company and securities convertible into equity shares and shall include American Depository Receipts (ADRs), Global Depository Receipts (GDRs) or other depository receipts representing underlying equity shares or securities convertible into equity shares and where the context so requires shall include the Resultant Shares also. |
2.28 | Recognised Stock Exchange/Stock exchange means, a stock exchange which is notified / recognized by any government authority as a stock exchange, for the purpose of trading in shares. |
2.29 | Shareholder means a person who is registered as a shareholder in the Companys register of shareholder. |
2.30 | Strategic Sale refers to the sale of hundred percent of the equity of the Company in its entirely and / or any event resulting from Corporate Action undertaken by the Company. |
2.31 | Subsidiary means a subsidiary Company of Azure Power Global Limited, as defined in the Mauritius Companies Act 2001. |
2.32 | Vesting means the process by which an employee becomes eligible to exercise his rights to apply for shares of the Company pursuant to the options granted to him under the Plan. |
2.33 | Vesting Date in relation to an option means the earliest date on which the rights under the options may be exercised by grantee. |
2.34 | Vested Options means an option in respect of which the relevant vesting conditions have been satisfied and as such, the eligible Employee has become eligible to exercise the option. |
2.35 | Unvested Options means an option in respect of which the relevant vesting conditions have been satisfied and as such, the eligible employee has not become eligible to exercise the option. |
The definitions as given in this section are for the purposes of interpretations of this Plan and should not be used for any other purposes.
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
II) | Interpretations |
In this document, unless the contrary intention appears:
i) | the singular includes the plural and vice versa; |
ii) | the word person includes an individual, a firm, a Company, an association of persons or a body of individuals whether incorporated or not, or local authority; and |
iii) | any word or expression importing the masculine, feminine or neuter genders only, shall be taken to include all three genders. |
III) | Article Headings |
Article headings are for information only and shall not affect the construction of this document.
IV) | References |
i) | A reference to an Article or schedule is respectively a reference to an Article or schedule of this document. The schedules to this document shall for all purposes form part of this document. |
ii) | Reference to any Act, Rules, Statute or Notification shall include any statutory modification, substitution or re-enactment thereof. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 3
IMPLEMENTATION
3.1 | This Plan shall be implemented by the Compensation Committee under the policy and framework laid down by the Committee and/or Board of the Company, in accordance with the authority delegated to the Compensation Committee in this regard from time to time and subject to the amendments, modifications and alterations to the Plan made by the Committee and/or Board in this connection. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 4
EFFECTIVE DATE AND PLAN DURATION
4.1 | This Plan shall be deemed to have come into force on 20th July, 2015 or on such date other date as may be decided by the Committee. |
4.2 | The Plan shall expire and no grants will be made after 10 years, or such other date as may be decided by the Committee. |
4.3 | The tenure of the Plan shall be 10 years from date of Plan approval. Any stock Options, which remain un-granted after Closing Date, would automatically deemed to be lapsed and/or ineffective. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 5
ADMINISTRATION AND COMPENSATION COMMITTEE
5.1 | This Plan shall be administered by the Compensation Committee, as outlined in Article 3 above and will be in compliance with the terms of the Plan and Applicable Law, as would be prevailing from time to time and in addition to other express powers and authorizations conferred by the Plan and the Compensation Committee which shall be comprised of two or more nominee director(s) & independent director(s). |
5.2 | The Compensation Committee shall consist of such number of persons, as the Committee shall deem fit. The Compensation Committee, in exercise of its powers, may require any information from the Committee and/or seek any select, or receive advice from any Employee as it may deem fit to, fully and effectively discharge its duties and responsibilities. The Committee shall constitute a Compensation Committee for administration, implementation and superintendence of the Plan. The Compensation Committee shall be a committee consisting directors who are also members of the Board. |
5.3 | The powers of the Compensation Committee, inter alia, include the power to: |
5.3.1 | determine the number of Options to be Granted, to each Employee and in the aggregate, and the time at which such Grant shall be made; |
5.3.2 | determine the vesting and/or lock-in-period of the Grant made to any Employee and/or any conditions subject to which such vesting may take place; |
5.3.3 | determine the Employees eligible for participation in the Plan in compliance of this Plan; |
5.3.4 | determine any person (who has entered into, or works under an Agreement with the Company) eligible for participation in the Plan; |
5.3.5 | determine the performance parameters for Grant and/or Vesting of Options granted to an Employee, under the Plan; |
5.3.6 | assess the performance of an Employee for granting/determining the Vesting of the Options; |
5.3.7 | lay down the conditions under which Options vested in Employees may lapse in case of termination of employment for fraud, misconduct or where an Employee joins competition etc; |
5.3.8 | determine the Exercise Period within which the Employee should Exercise the Options and that Options would lapse on failure to Exercise the Option with in the Exercise Period; |
5.3.9 | specify time period within which the Employee shall Exercise the Vested Options in the event of termination or resignation of an Employee; |
5.3.10 | lay down the procedure for making a fair and reasonable adjustment to the number of Options and to the Exercise Price in case of Change in the Capital Structure and/or Corporate Action; |
5.3.11 | provide for the right of an Employee to Exercise all the Options Vested in him at one time or at various points of time within the Exercise Period; |
5.3.12 | decide the number of Shares of Common Stock which may be issued under each Option; |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
5.3.13 | lay down the method for satisfaction of any tax obligation arising in connection with the Options or such Shares; |
5.3.14 | lay down the procedure for Cashless Exercise of Options, if any; |
5.3.15 | provide for the Grant, Vesting and Exercise of Options in case of Employees who are on long leave or whose services have been seconded to any other Company or who have joined Holding Company or a Subsidiary or an Associate Company at the instance of the Employer; |
5.3.16 | And generally exercise such powers as may be necessary or expedient in connection of the implementation or administration of the Plan. |
The members of the Compensation Committee and their powers and functions can be specified, varied, altered or modified from time to time by the Committee subject to such rules and regulations as may be in force. The Committee may further provide that the Compensation Committee shall exercise certain powers only after consulting the Committee.
5.4 | The meetings of the Compensation Committee may be held by conference call. A simple majority of the Compensation Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, or in lieu of a meeting, acts approved in writing by a majority of the members, shall be deemed to be the acts of the Compensation Committee. |
5.5 | The decision of the Compensation Committee will be final and binding in respect of the Plan. If the members of the Compensation Committee are evenly divided on any issue, then the Chair of the Compensation Committee (or in his or her absence, a member designated by the Compensation Committee members present at such meeting) will have the second or casting vote. |
5.6 | No member of the Compensation Committee shall be personally liable for any decision or action taken in good faith with respect to the Plan. |
5.7 | A member of the Compensation Committee shall abstain from participating in and deciding any matter relating to granting of any Option to him. |
5.8 | The members of the Committee may attend and observe meetings of the Compensation Committee, but shall not participate in any discussion or deliberation unless invited to do so by the Compensation Committee and in any event shall not be entitled to vote. |
5.9 | The Compensation Committee shall keep regular minutes of any meetings where actions are taken. Any such minutes kept by the Compensation Committee shall be distributed to each member of the Compensation Committee and other members of the Committee. The Chair of the Compensation Committee shall maintain the original signed minutes. The Chair shall report to the Committee at appropriate times and as otherwise requested by the Committee. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 6
GRANT OF OPTIONS
6.1 | Compensation Committee may from time to time (for existing employees annually and for new Employees at the time of joining) make Grants to one or more Employees, determined by it to be eligible for participation in the Plan in accordance with the provisions of Article 14 of the Plan. The sum of all grants made under this Plans shall not at any time exceed 10% of the total issued and subscribed equity capital of the Company. Options shall be deemed to have been issued under the Plan only to the extent actually issued and delivered pursuant to a Grant. To the extent that a Grant lapses or the rights of its Grantee terminate, any shares of Common Stock subject to such Grant shall again be available for the making of a Grant. The aggregate number of shares which may be issued under the Plan shall be subject to adjustment in the same manner as provided in this Plan with respect to shares of Common Stock subject to Options then outstanding. |
6.2 | The Grant shall be at such price as may be determined by the Compensation Committee and shall be specified in the Grant letter. |
6.3 | The Grant shall be in writing and shall specify the number of options granted, the price payable for exercising the options, the date/s on which some or all of the Options shall be eligible for vesting, fulfillment of the performance and other conditions, etc, if any, subject to which vesting shall take place and other terms and conditions thereto. |
6.4 | The option shall not be transferable and can be exercised only by the employees of the Company. |
6.5 | The Company shall issue fresh shares to meet the exercise obligation of the options. |
6.6 | The Company has set aside 10% of the paid up equity capital for the purpose of this Plan. Each Option entitles the Grantee thereof to apply for and be allotted one equity share of the Company at the Exercise Price. |
6.7 | All Employees who are eligible and are selected by the Compensation Committee for the grant shall be granted options the date they become eligible under the Plan. However, the Compensation Committee has the sole discretion in granting options prior to the employees meeting all the eligibility criteria. |
6.8 | All eligible Employees will be granted options by the Compensation Committee on the basis of any or all of the following criteria, as and when they apply: |
| Level, role and performance of the Employee; |
| Tenure in Company; |
| Such other factors as Compensation Committee may decide from time to time. |
6.9 |
Each Option shall be evidenced by an Agreement between the Company and the Grantee, which shall contain such terms, and conditions as may be approved by the Compensation Committee. Each Agreement shall specify including but not limited to, (i) the effect of termination of employment, (ii) Disability, retirement or death on the exercise ability of the |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
Option and such other terms and conditions as the Compensation Committee may deem necessary. |
6.10 | Under each Agreement, Grantee shall have the right to appoint any individual or legal entity in writing as his nominee under the Plan in the event of his death / Disability. Such nomination may be revoked in writing by the Grantee at any time during the time of employment and a new nominee may be appointed in writing on the form provided by the Compensation Committee for such purpose. Such nominee shall be the only legal representative recognised by the Company/ Compensation Committee as the inheritor of the Grantees option to the exclusion of all others. |
6.11 | The term of each Option shall be as specified by the Compensation Committee at the Grant Date and shall be stated in the Agreement; provided, however, that an Option may not be exercised after the end of the tenure of the Plan. |
6.12 | Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Compensation Committee and as shall be permissible under the Applicable Law and the terms of the Plan, which shall be specified in the Agreement evidencing the Option. An Option shall not, however, be exercised for fractional shares. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 7
VESTING OF OPTIONS
7.1 | The Vesting period will be decided by the Compensation Committee as and when any Grant takes place. |
7.2 | The Vesting period for all the Grant of options under this Plan shall be as mentioned below: |
Vesting period from the date of Grant |
Percentage of vesting | |||
At the end of year 1 |
25 | % | ||
At the end of year 2 |
25 | % | ||
At the end of year 3 |
25 | % | ||
At the end of year 4 |
25 | % |
Notwithstanding anything to the contrary in this Plan, the Compensation Committee shall be entitled, in its absolute discretion, to vary or alter the Vesting Date from Employee to Employee or class thereof, as it may deem fit. Provided, however, that such variation shall not be to the disadvantage of the Employees.
7.3 | The Compensation Committee, in its absolute discretion may permit the Options granted, including Options, which have not vested, to be exercised, within such time, subject to such terms and conditions as it may determine. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 8
EXERCISE OF OPTIONS
8.1 | There shall be no lock-in after the Options have Vested. The Vested options shall be eligible to be exercised on the Vesting Date itself. Notwithstanding anything to the contrary in this Plan, the Compensation Committee shall be entitled, in its absolute discretion, provide for any lock-in period after the Options have Vested from Employee to Employee or class thereof, as it may deem fit. |
8.2 | Notwithstanding any provisions to the contrary in this Plan, the Options must be Exercised before the end of the tenure of the Plan. |
8.3 | The Exercise Price would be decided at the Compensation Committees discretion. Such Exercise price will be intimated to the eligible Employees at the time of Grant of Options to them. |
8.4 | The eligible Employee can Exercise rights to convert the options into Shares either in full or in stages by addressing a communication to the Compensation Committee as per the Form that may be prescribed by the Compensation Committee from time to time. Eligible Employee shall mention the number of Options that he is willing to Exercise under the Plan. The eligible Employee, shall, at the time of Exercise of options send the prescribed form, together with payment for an amount equal to the aggregate Exercise Price payable in respect of the options exercised. |
8.5 | Under a Cashless Exercise, a holder who exercises the Options will have to simultaneously sell the Shares acquired on Exercise of Options and will only be entitled to receive the difference between the selling price and the Exercise Price for the Options exercised by him after deducting applicable taxes payable on exercise/sale, if any, and other amounts, expenses and charges due from him (including that in connection with the sale). |
8.6 | For the purpose of implementing the Cashless Exercise the Compensation Committee shall be entitled to specify such procedures and/or mechanisms for the Shares issued on Exercise of the Options as may be necessary and the same shall be binding on the Employees . |
For the purpose of this Article, unless otherwise stated, Selling Price means:
a. | Where the shares are listed on a Recognized Stock Exchangethe actual price realized. |
b. | Where the Shares of the Company are not listedthe Fair Market Value as defined in Articles 2.17 of this Plan. |
8.7 | Notwithstanding anything contained herein or elsewhere in this Plan, it is hereby clarified that the Company is under no obligation to either buy the Shares or pay any compensation to any holder under this Article as a result of the inability or unwillingness of the holder to acquire any Shares, whether due to lack of funds, any restriction under law or otherwise. |
8.8 |
Notwithstanding anything contained elsewhere in the Plan, the Compensation Committee and/or the Committee may, if the Exercise of Options within the Exercise Period, is prevented by any law or regulation in force, defer or refuse to permit the Exercise of Options till such time as it is prohibited by the applicable laws or regulations and in such an |
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Azure Power Global Limited ESOP Plan 2015
event. The Company shall not be liable to pay any compensation or similar payment to the Employee for any loss suffered due to such refusal. |
Provided further, that the Committee shall have the power and be and is hereby authorized to cancel all or any of the Options granted under the Plan if so required under any law or guideline for the time being in force
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 9
EXIT OPTIONS
9.1 | Whilst in employment: |
| Until IPO or a Strategic Sale of the Company, the Employee who has Exercised his Options shall not, other than as expressly provided for herein or as may be amended in the Plan, sell, pledge, mortgage, charge, encumber or otherwise dispose off or create any lien or interest in the underlying Common Stock, whether express or implied in any manner whatsoever. |
| In event of an IPO, the Employee will be free to sell his Shares in the open market, subject to any holding restrictions by any regulatory body prevalent at that time. In event of a Strategic Sale prior to the IPO, all Vested Options of the Employee will be exited in the currency of the transaction (cash or equity swap, as the case may be). With respect to Unvested Options, they will be traded with Options under the new entity or they will be deemed as Vested and will be treated in the same manner as all other Vested Options. |
9.2 | Whilst not in employment: |
| Until IPO, or a Strategic Sale of the Company prior to the IPO, the ex-employee who has exercised his Options shall be free to sell his Shares to a third party subject to the right of first refusal lying with the Promoters and/or any other Employee of the Company at the price offered by the third party and exercise of right for first refusal shall not exceed a period of 30 days. |
| In event of an IPO, the ex-employee will be free to sell his Shares in the open market, subject to any restrictions under the Applicable Law, if any, at the time. In event of a Strategic Sale prior to the IPO, all exercised options of the ex-employee will be eligible for exit in the currency of the transaction (cash or equity swap) as for existing Employees of the Company. |
9.3 | If there is no IPO in 10 years, a market mechanism shall be provided to Employees to exit. This may be either: |
| An employee welfare trust funded by the Company which undertakes buying and selling of shares; or |
| Promoter(s) or other Shareholder(s) buy shares from any Employee wanting to exit. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 10
TERMINAL CONDITIONS
10.1 | If a Grantees employment (or other service) with the Company terminates: |
| For Cause, then the Options, all Vested but not Exercised as well as Unvested Options get cancelled immediately. |
Cause shall mean as per labor law , (i) the failure of the Employee, as judged by the Committee, to achieve assigned performance targets and objectives, (other than any such failure resulting from retirement, death or Disability as defined below), (ii) the engaging by the Employee in willful, reckless or grossly negligent misconduct which is not as per the code of conduct framed by the Company., or (iii) the Employees pleading guilty to or conviction of a felony (iv) fraud, misfeasance, breach of trust or wrongful disclosure of any secret or confidential information about the Company to any third party, or (v) employment of the Employee in any other organization or provision of services by the Employee for any other organization.
10.2 | Due to voluntary resignation on the part of the Grantee or on completion of the period of contract of his employment (or other service), then the Grantee shall have right to Exercise the Options that have vested upto the date of resignation or the date of completion of the period of contract of his employment (or other service) (as the case may be) and such Options shall be exercised within sixty days from the date of the voluntary resignation or completion of the period of contract of employment (or other service). The Unvested Options shall lapse on the date of resignation or completion of the period of contract of employment (or other service). |
10.3 | If a Grantee dies or becomes totally and permanently disabled while an employee of the Company; the granted stock options shall vest with the Employee (vested or unvested) or the beneficiary designated by the Grantee pursuant to Article 6.10 and the options must be exercised as below: - |
| In case of death within twelve months from the date of death or such extended time provided by the Compensation Committee; |
| In case of total and Disability a period of sixty days or such extended time provided by the Compensation Committee |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 11
NON-ASSIGNABILITY
11.1 | The Option shall not be transferable or assignable by the Employee, otherwise than by will or the laws of descent and distribution and the Option shall be exercisable, during the Employees lifetime, only by him or, during periods of legal disability, by his legal representative. No Option shall be subject to execution, attachment or similar process. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 12
RIGHTS OF AN EMPLOYEE IN STOCK
12.1 | Neither Employee, nor his successor in interest, shall have any of the rights of a Shareholder of the Company with respect to the Shares for which the Option is granted until options are exercised and Shares are issued by the Company. |
12.2 | Except as may be otherwise provided in this Plan, the Option granted hereunder shall not be affected by any change of employment so long as employee continues to be employed by the Company or any Company within the Azure Power group. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 13
TERMS AND CONDITIONS OF SHARES
13.1 | All Shares acquired under the Plan shall be listed on the Stock Exchanges on which the Companys shares are listed and will rank pari passu with all other Shares of the Company for the time being in issue, save as regards any right attached to any such Shares by reference to a record date prior to the date of allotment. Dividend in respect of Shares allotted on Exercise of the Options shall be payable pro-rata from the date of allotment. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 14
ELIGIBILITY
14.1 | A Stock Option Grant pursuant to the Plan may be made only to an individual who, at the time of Grant, is an Employee of the Company. |
14.2 | The Compensation Committee however is authorized to change the eligibility criteria from time to time. |
14.3 | Each Grant shall be evidenced by a written instrument duly executed by or on behalf of the Company. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 15
CHANGE IN CAPITAL STRUCTURE OR CORPORATE ACTION
15.1 | Except as hereinafter provided, a Grant made shall be subject to adjustment, by the Compensation Committee, at its discretion as to number and price of Options or Shares, as the case may be, in the event of Change in Capital Structure or a Corporate Action as defined in this Plan. |
15.2 | The existence of the Plan and the Grants made hereunder shall not in any way affect the right or the power of the Board or the Shareholders or the Company to make or authorize any Change in Capital Structure or any Corporate Action including any issue of shares, debt or other securities having any priority or preference with respect to the Shares or the rights thereof. |
15.3 | If there is a Change in the Capital Structure of the Company before the Options granted under this Plan are exercised, the Employee shall be entitled to Exercise of the Options, to such number of Resultant Shares to which he would have been entitled as if all the Options not exercised by him had been exercised by him before such Change in the Capital Structure of the Company had taken place and the rights under the Options shall stand corresponding adjusted. |
15.4 | The Shares in respect of which the Options are granted, are Shares as presently constituted. But if and when, prior to the expiry of the Exercise Period there is a Change in the Capital Structure of the Company, the number of Shares with respect to which the Options may thereafter be exercised shall, in the event of: |
i. | an increase in the number or Resultant Shares, be proportionately increased, and the Exercise Price, be proportionately reduced. |
ii. | a reduction in the number of Resultant Shares, be proportionately reduced, and the Exercise Price, be proportionately increased. |
Provided further that in case the provisions of applicable law restrict/prohibit the issue of shares at a discount to its par value, the Exercise Price shall not be less than the amount as prescribed under such law.
15.5 | In the event of Corporate Action, the Compensation Committee, at least seven days prior to any Corporate Action or thirty days thereafter, acting in its absolute discretion with or without the consent or approval of the Employee, as it may deem fit, shall in respect of the outstanding Options act on any of the following alternatives: |
i. | Provide that on any Exercise of Options hereafter, the Employee shall be entitled to the Shares and / or Resultant Shares as if the Employee had been a Holder of the Shares on Exercise of the Options. |
ii. | Make such adjustments to the Options outstanding to reflect the Corporate Action, as may be necessary, |
iii. |
Require the mandatory surrender to the Company, by all or some of the Employees, of all or Some of the outstanding Options, irrespective of whether, the Options, have vested or not, as on that date, and in such an event the Compensation Committee |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
shall pay such Employees an amount in cash or otherwise, per Option, as the case may be, of the Change in Control Value after deducting the balance Exercise Price payable, if any. |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 16
AMENDMENT OR TERMINATION OF THE PLAN
16.1 | The Committee in its absolute discretion may from time to time amend, alter or terminate the Plan or any Grant or the terms and conditions thereof provided, that no amendment, alteration or termination in any Grant previously made may be carried out, to the extent possible, which would impair or prejudice the rights of the Employee without the consent of the concerned Employee. |
Provided further, that the Committee may not, without the approval of the Shareholders, amend the Plan:
| To increase the aggregate number of Shares which may be issued pursuant to the provisions of the Plan on Exercise or surrender of Options or upon Grants; |
| To change the Option Exercise Price; |
| To extend the maximum period during which Grants may be made under the Plan; |
16.2 | Without prejudice to the above, the Board, without any reference to or consent of the Employee concerned, amend the Plan or Grant or any Agreement to comply with any laws, regulations or guidelines, which is or may hereinafter, become applicable to this |
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
ARTICLE 17
OTHERS
17.1 | No Right to a grant |
Neither the adoption of the Plan nor any action of the Compensation Committee shall be deemed to give an Employee any right to be granted an Option to purchase Common Stock, to receive a Grant or to any other rights hereunder except as may be evidenced by an Option Agreement duly executed on behalf of the Company, and then only to the extent of and on the terms and conditions expressly set forth therein
17.2 | No Employment Rights Conferred |
Nothing contained in the Plan or in any grant made hereunder shall:
i. | confer upon any employee any right with respect to continuation of employment with the Company, or |
ii. | interfere in any way with the right of the Company or its subsidiary to terminate employment or services of any employee at any time. |
17.3 | No Restriction on Change in Capital Structure or Corporate Action |
Nothing contained in the Plan shall be construed to prevent the Company from taking any Corporate Action which is deemed by the Company to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any future Grant under the Plan. No Employee, beneficiary or other person shall have any claim against the Company as a result of such action.
17.4 | Taxation |
All taxation will be to the employees account. The Company shall have the right to deduct, in connection with all Grants, any taxes, required by law to be deducted at source and to require any payments necessary to enable it to satisfy such obligations.
The holder of Shares will authorize the Company to sell such number of Shares as would be necessary to discharge the obligation in the respect of tax deduction at source and appropriate the proceeds thereof on behalf of the employee.
17.5 | Confidentiality |
The Employee shall ensure complete confidentiality in respect of all documents, matters and discussions in relation to the Plan, Grant, the Option Agreement or any connected matter. Any violation may result in cancellation of Grant or compulsory retransfer of Shares to a nominee as the Compensation Committee may deem fit without prejudice to the other action which may be taken in this regard.
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
17.6 | Insider Trading |
The Employee shall ensure that there is no violation of:
i. | Insider Trading Regulations of the country and/ or the recognised Stock Exchange on which the shares of the Company are listed or any local laws, rules or regulations applicable to the Company. |
ii. | Other applicable restrictions for prevention of Fraudulent and/ or Unfair Trade Practices relating to the securities market. |
The Compensation Committee shall be entitled to frame such rules and regulations as may be necessary to ensure that there is no violation of the above referred regulations.
The employee shall keep the Company, the Board, and the Compensation Committee, fully indemnified in respect of any liability arising for violation of the above provisions.
17.7 | New Plans |
Nothing contained in the Plan shall be construed to prevent the Company directly or through any trust settled by Company, from implementing any other new Employee Ownership Plan which is deemed by the Company to be appropriate or in its best interest, whether or not such other action would have any adverse impact on the Plan or any Grant made under the Plan. No Employee or other person shall have any claim against the Company and/or trust as a result of such action.
17.8 | Notice and Correspondences |
Any notice required to be given by, or any correspondence from, an employee to the Company / Compensation Committee, may be given at the Companys principal office, or such other address as may be notified in writing.
17.9 | Disputes/Issues |
Any disputes or differences of any nature arising hereunder shall be referred to the Compensation Committee and its decision shall be final and binding in all respects. If the members of the Compensation Committee are evenly divided on any issue, then the Chairman of the Compensation Committee shall have a second or casting vote.
17.10 | Information to Employees |
Grantees under the Plan shall be informed about the value of share, as and when carried out by the Company / Compensation Committee, at the sole discretion of the Company / Compensation Committee.
17.11 | Governing Laws |
The Plan shall by construed in accordance with the laws of Mauritius and other applicable laws. The shares issued pursuant to this Plan shall be governed by the Corporate and Securities Laws of the Mauritius and in a case where the Shares are listed on a stock exchange in a country other than Mauritius, the laws of the country / stock exchange in which the Shares are listed shall also apply.
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Azure Power Global Limited
Azure Power Global Limited ESOP Plan 2015
SIGNED BY THE WITHINNAMED
Directors of Azure Power Global Limited
1) Inderpreet Singh Wadhwa, Director
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Exhibit 10.3
SHAREHOLDERS AGREEMENT
DATED: 22 JULY, 2015
BY AND AMONGST
INTERNATIONAL FINANCE CORPORATION
AND
HELION VENTURE PARTNERS II, LLC
AND
HELION VENTURE PARTNERS INDIA II, LLC
AND
FC VI INDIA VENTURE (MAURITIUS) LTD.
AND
DEG DEUTSCHE INVESTITIONS UND ENTWICKLUNGSGESELLSCHAFT MBH
AND
SOCIÉTÉ DE PROMOTION ET DE PARTICIPATION POUR LA COOPÉRATION
ÉCONOMIQUE S.A.
AND
IFC GIF INVESTMENT COMPANY I
AND
AZURE POWER GLOBAL LIMITED
AND
IW GREEN INC.
AND
MR. INDERPREET SINGH WADHWA
MR. HARKANWAL SINGH WADHWA
DELHI | MUMBAI | BANGALORE | HYDERABAD
TABLE OF CONTENTS
1. DEFINITIONS AND INTERPRETATION |
4 | |||
2. EFFECTIVENESS AND SHARE CAPITAL OF THE COMPANY |
19 | |||
3. REPRESENTATIONS AND WARRANTIES |
21 | |||
4. RIGHTS OF THE INVESTORS |
22 | |||
5. INVESTORS RIGHTS ON FURTHER ISSUE OF SHARES |
27 | |||
6. TRANSFER OF SHARES |
30 | |||
7. QUALIFIED INITIAL PUBLIC OFFERING |
48 | |||
8. REINSTATEMENT OF RIGHTS |
51 | |||
9. BUY-BACK OF EQUITY SECURITIES |
52 | |||
9A. BUY-BACK FROM IFC, DEG OR PROPARCO |
57 | |||
10. BORROWINGS & FUNDING |
58 | |||
11. MANAGEMENT OF THE COMPANY |
58 | |||
12. SHAREHOLDERS MEETINGS |
65 | |||
13. EXERCISE OF VOTING & OTHER RIGHTS BY PARTIES |
66 | |||
14. INFORMATION RIGHTS |
67 | |||
15. ANNUAL BUSINESS PLAN AND BUDGET |
68 | |||
16. FINANCIAL ACCOUNTING AND AUDITS |
69 | |||
17. OTHER COVENANTS |
69 | |||
18. NON-COMPETE AND NON-SOLICITATION |
71 | |||
19. RIGHT OF INSPECTION |
72 | |||
20. INTELLECTUAL PROPERTY RIGHTS |
72 | |||
21. TERMINATION |
73 | |||
22. CONFIDENTIALITY |
74 | |||
23. GOVERNING LAW AND ARBITRATION |
75 | |||
24. NOTICES |
76 | |||
25. MISCELLANEOUS PROVISIONS |
79 | |||
SCHEDULE A DEED OF ADHERENCE |
89 | |||
SCHEDULE B PFIC ANNUAL INFORMATION STATEMENT |
90 | |||
SCHEDULE C TERMS AND CONDITIONS OF SERIES A CCPS |
93 | |||
SCHEDULE D TERMS AND CONDITIONS OF SERIES B CCPS |
97 | |||
SCHEDULE E TERMS AND CONDITIONS OF IFC CCDS |
101 | |||
SCHEDULE F TERMS AND CONDITIONS OF SERIES C CCPS |
107 |
SCHEDULE G TERMS AND CONDITIONS OF SERIES D CCPS |
111 | |||
SCHEDULE H TERMS AND CONDITIONS OF DEG CCDS |
115 | |||
SCHEDULE I TERMS AND CONDITIONS OF IFC II CCDS |
122 | |||
SCHEDULE J TERMS AND CONDITIONS OF SERIES E CCPS |
128 | |||
SCHEDULE K IFC POLICY COVENANTS |
134 | |||
SCHEDULE L INVESTORS CONSENT RIGHTS |
145 | |||
SCHEDULE M MAJORITY INVESTOR CONSENT RIGHTS |
147 | |||
SCHEDULE N LIST OF COMPETITORS |
149 | |||
SCHEDULE O DEG EXCLUSION LIST |
150 | |||
SCHEDULE P PROPARCO POLICY COVENANTS |
151 | |||
SCHEDULE Q VOTING PERCENTAGES |
161 | |||
SCHEDULE R TERMS AND CONDITIONS OF IFC III CCDs |
162 | |||
SCHEDULE S TERMS AND CONDITIONS OF SERIES F CCPS |
169 | |||
SCHEDULE T TERMS AND CONDITIONS OF SERIES G CCPS |
175 | |||
SCHEDULE U TERMS AND CONDITIONS OF SERIES H CCPS |
181 | |||
SCHEDULE V INSURANCE REQUIREMENTS |
186 | |||
SCHEDULE W REPORTING IMPACT INDICATORS |
187 | |||
SCHEDULE X LIST OF RELATED AGREEMENTS |
190 | |||
SCHEDULE Y ISSUE PRICE AND USD-INR CONVERSION RATE |
191 | |||
SCHEDULE Z DISTRIBUTION PERCENTAGE |
192 |
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT is made on this 22nd day of July, 2015;
BY AND AMONG
1. | INTERNATIONAL FINANCE CORPORATION, an international organization established by the Articles of Agreement among its member countries including the Republic of India (IFC), of the First Part; |
AND
2. | HELION VENTURE PARTNERS II, LLC, a company established under the laws of Mauritius, having its principal office at International Management (Mauritius) Ltd, Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius (hereinafter referred to as Helion Partners which expression shall mean and include the said company, its executors, assigns and successors-in-interest), of the Second Part; |
AND
3. | HELION VENTURE PARTNERS INDIA II, LLC, a company established under the laws of Mauritius, having its principal office at International Management (Mauritius) Ltd, Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius (hereinafter referred to as Helion India which expression shall mean and include the said company, its executors, assigns and successors-in-interest), of the Third Part; |
AND
4. | FC VI INDIA VENTURE (MAURITIUS) LTD., a company established under the laws of Mauritius, having its principal office at International Financial Services Limited, IFS Court, 28 Cybercity, Ebene, Mauritius (hereinafter referred to as FC which expression shall mean and include the said company, its executors, assigns and successors-in-interest), of the Fourth Part; |
AND
5. | DEG DEUTSCHE INVESTITIONS UND ENTWICKLUNGSGESELLSCHAFT MBH, company established under the laws of Federal republic of Germany, having its office at Kammergasse 22, 50676-Cologne, Germany, (hereinafter referred to as DEG which expression shall mean and include the said company, its executors, assigns and successors-in-interest), of the Fifth Part; |
AND
6. | SOCIÉTÉ DE PROMOTION ET DE PARTICIPATION POUR LA COOPÉRATION ÉCONOMIQUE S.A., a société anonyme having a share capital of Euros 693,079,200 registered with the RCS of Paris under the number 310 792 205, which registered office is at 151 rue Saint Honoré, 75001- PARIS (Proparco) Sixth Part; |
AND
1
7. | IFC GIF INVESTMENT COMPANY I, a company established under the laws of Republic of Mauritius, having its principal office at C/o Cim Fund Services Ltd, 33 Edith Cavell Street, Port Louis, Mauritius (GIF), of the Seventh Part; |
AND
8. | AZURE POWER GLOBAL LIMITED, a company incorporated under the laws of Mauritius and having its registered office at 1st Floor, The Exchange, 18 Cybercity, Ebene, Republic of Mauritius (hereinafter referred to as the Company which expression shall mean and include the said company, its executors, assigns and successors-in-interest), of the Eighth Part; |
AND
9. | MR. INDERPREET SINGH WADHWA (hereinafter referred to as IW), son of Mr. Harkanwal Singh Wadhwa residing at J-57, Third Floor, Saket, New Delhi 110 017, MR. HARKANWAL SINGH WADHWA (hereinafter referred to as HW), son of Late Mr. Manohar Singh Wadhwa, residing at C-2324 Ranjit Ave, Amritsar, Punjab, and IW Green Inc., a company incorporated under the laws of the United States and having its principal office at 341, Raven Circile, Wyoming, Zip Code 19934, Kent, United States of America (IW Green) (IW, HW and IW Green shall hereinafter collectively be referred to as the Sponsors, which expression shall mean and include their successors, legal heirs and permitted assigns), of the Ninth Part; |
(Helion Partners and Helion India are collectively referred to as Helion. Helion, FC, IFC, GIF, Proparco and DEG shall hereinafter be collectively referred to as the Investors).
(The Company, IFC, GIF, Helion, FC, DEG, Proparco and the Sponsors are individually referred to as Party and collectively referred to as the Parties).
WHEREAS
(A) | The Company has been incorporated for the purpose of holding the share capital of Azure Power India Private Limited (AZI), a company incorporated under the laws of India and having its registered office at 8, LSC, Madangir, Pushpavihar, New Delhi 110062, India and engaged in the business of development and operation of solar power plants in India and generation of solar electricity therefrom. |
(B) | All Investors (other than GIF), IW and HW were the shareholders of AZI, and had executed the Second Consolidated and Amended Shareholders Agreement dated 10 th June, 2015 to govern their rights and obligations as the shareholders of AZI (Existing AZI SHA). Pursuant to certain understanding between the Parties, all Investors (other than GIF) intend to shift their direct equity investments from AZI to the Company, thereby becoming the investors in the Company and the Company holding the equity securities of AZI that were subscribed by the Investors in AZI. To give effect to this understanding, the Investors have entered into the following agreements to subscribe to the Equity Securities of the Company, and the Company to issue and allot the respective Equity Securities to the Investors. |
2
(C) | IFC intends to subscribe to the IFC Securities to be issued and allotted by the Company pursuant to the securities subscription agreement executed on or around the date of this Agreement between, inter alia, IFC and the Company (IFC Subscription Agreement). |
(D) | DEG intends to subscribe to the DEG Securities to be issued and allotted by the Company pursuant to the securities subscription agreement executed on or around the date of this Agreement between, inter alia , DEG and the Company (DEG Subscription Agreement). |
(E) | Proparco intends to subscribe to the Proparco Securities to be issued and allotted by the Company pursuant to the securities subscription agreement executed on or around the date of this Agreement between, inter alia , Proparco and the Company (Proparco Subscription Agreement). |
(F) | Helion intends to subscribe to the Helion Securities to be issued and allotted by the Company pursuant to the securities subscription agreement executed on or around the date of this Agreement between, inter alia , Helion and the Company (Helion Subscription Agreement). |
(G) | FC intends to subscribe to the FC Securities to be issued and allotted by the Company pursuant to the securities subscription agreement executed on or around the date of this Agreement between, inter alia , FC and the Company (FC Subscription Agreement ). |
(H) | GIF intends to subscribe to 111,071 (One Hundred Eleven Thousand and Seventy One) Series H CCPS to be issued and allotted by the Company pursuant to the subscription agreement dated 24 th June, 2015 between, inter alia , GIF and the Company (GIF Subscription Agreement). |
(I) | In addition to the IFC Securities mentioned above, IFC intends to subscribe to 22,214 (Twenty Two Thousand, Two Hundred and Fourteen) Series H CCPS to be issued and allotted by the Company pursuant to the Letter Agreement executed on or around the date of this Agreement between, inter alia , IFC, AZI, IW and the Company (IFC Subscription Agreement-2). |
(J) | In addition to the Proparco Securities mentioned above, Proparco intends to subscribe to 18,882 (Eighteen Thousand, Eight Hundred and Eighty Two) Series G CCPS to be issued and allotted by the Company pursuant to the subscription agreement executed on or around the date of this Agreement between, inter alia , Proparco and the Company (Proparco Subscription Agreement-2). |
(K) | IW Green Inc. is entirely owned and controlled by IW, and currently holds Equity Shares of the Company, and is represented by IW for the purposes of this Agreement. |
(L) | Pursuant to the above, the Parties are entering into this shareholders agreement for incorporating the rights and obligations of all Investors, Sponsors and the Company for regulating the management and control of the affairs of the Company and certain other rights and obligations inter se in accordance with the terms and conditions set out herein. |
NOW THEREFORE IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES AND THIS AGREEMENT WITNESSETH AS UNDER:
3
1. | DEFINITIONS AND INTERPRETATION |
1.1 | In this Agreement the following terms, to the extent not inconsistent with the context, shall have the meanings assigned to them herein below: |
Accounts shall mean the books of account of the Company and also includes its balance sheet, profit and loss account and all other records, ledgers, accounting notations and pertinent documentation.
Act shall mean the Companies Act 2001 of Mauritius as amended from time to time.
Affiliate in relation to a Person,
(i) | being a corporate entity, shall mean any entity or Person, which Controls, is Controlled by, or is under the common Control of such Person; |
(ii) | being an individual, shall mean any Relative or any other entity or Person, which is Controlled by such Person or a Relative of such individual; and |
(iii) | in any other case shall mean a Person Controlled by a Party/ies to this Agreement; |
Provided that, in relation to Helion and FC, Affiliate shall also include any general partner, officer or director of Helion and FC and any venture capital fund now or hereafter existing which is Controlled by or under common Control with one or more general partners or shares the same management company with Helion and FC.
APGL Sharing Agreement means the APGL Sharing Agreement executed on or around the date of this Agreement between the Investors to give effect to the Liquidation Preference upon the occurrence of events set out in Clause 4 of this Agreement.
Agreement or SHA means this Shareholders Agreement and includes all recitals, schedules, annexes and exhibits that are annexed to it, and any amendments made to it by the Parties in writing.
Annual Business Plan and Budget shall mean the annual business plan and budget, which business plan and budget shall set forth for each Financial Year: (a) a detailed review of the prior Financial Years operational and financial performance and a description of the proposed business activities of the Company and AZI for such Financial Year and the next Financial Year based on the performance in the previous Financial Year; (b) quarterly projections of all revenue and cost heads and financing for such Financial Year and quarterly projections for the next Financial Year for the Company and AZI; (c) the expected amounts and anticipated timing of periodic capital needs, if any of the Company and AZI; and (d) a statement of capital expenditures and a detailed break-down of working capital for the Company and AZI.
Anti-Competitive Practice means:
(i) |
any common or implied action having as object and/or as effect to impede, restrict or distort fair competition in a market, in particular when it tends to: (1) restrict market access or the free exercise of competition by other companies; (2) prevent price fixing |
4
by the free play of markets by artificially favouring the increase or reduction of prices; (3) limit or control production, markets, investments or technical progress or, (4) share out markets or sources of supply; |
(ii) | any abuse by a company or a group of companies of a dominant position within an internal market or in a substantial part of it; |
(iii) | any bid or predatory pricing having as object and/or as effect to eliminate from a market or to prevent a company or one of its product from accessing a market. |
Applicable Liquidation Price means, as applicable, either the Senior Liquidation Price or the Series H Liquidation Price or the Series F Liquidation Price or the CCPS Liquidation Price or the Series A Liquidation Price.
Applicable Investor Securities means, as applicable, either the Series A CCPS or the Series B CCPS or the Series C CCPS or the Series D CCPS or the Series F CCPS or the Series H CCPS or the Proparco CCPS or the IFC CCDs or the IFC II CCDs or the IFC III CCDs or the DEG CCDs.
As If Converted Basis means the number of Equity Shares of the Company, calculated as if the then issued and outstanding relevant Share Equivalents had been exercised in full. Provided that each of the CCDs and Proparco CCPS will not be taken into consideration in the calculation of As If Converted Basis, till such time that they have not been transferred to a third party (not being an Affiliate of IFC, DEG or Proparco, as the case may be) in accordance with the terms of this Agreement. Provided however, that for the limited purpose of ascertaining the rights available to DEG and IFC (with respect to their compulsorily convertible debentures) and Proparco (with respect to its Proparco CCPS) in relation to Clause 11.8.2, the term on as As If Converted Basis shall include the DEG CCDs, IFC II CCDs, IFC III CCDs and Proparco CCPS and the voting percentages with respect to the Equity Securities on an As If Converted Basis in relation to Clause 11.8.2 shall be as set out in Schedule Q.
Articles shall mean the articles of association, the constitution or the bylaws of the Company (by whatever name called), as may be amended from time to time.
Assets shall mean assets or properties of every kind, nature, character and description (whether immovable, movable, tangible, intangible, absolute, accrued, fixed or otherwise) as operated, hired, rented, owned or leased by a Person from time to time, including cash, cash equivalents, receivables, securities, accounts and note receivables, real estate, plant and machinery, equipment, patents, copyrights, domain names, trademarks, brands, rights in databases and other intellectual property, raw materials, inventory, furniture, fixtures and insurance.
Authority means any national, supranational, regional or local government, or governmental, statutory, regulatory, administrative, fiscal, judicial, or government-owned body, department, commission (including but not limited to the SEC), authority, tribunal, agency or entity, or central bank (or any Person whether or not government owned and howsoever constituted or called, that exercises the functions of the central bank).
AZI Shareholders Agreement shall mean the amended and restated shareholders agreement entered on or around the date of this Agreement between the Company, AZI, IW and HW, in
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relation to governance and other matters relating to AZI.
Beneficial Owner means any individual or individuals who ultimately own or exercise control over any Investor.
Big Four Accounting Firms means the following accounting firms or their Affiliates: Deloitte Touche; PricewaterhouseCoopers; Ernst & Young; and KPMG.
Board shall mean the board of directors of the Company.
Buy Back Intimation shall have the meaning as assigned to it under Clause 9.1.
Buy Back Notice shall have the meaning as assigned to it under Clause 9.1.
Buy-Back Period shall have the meaning as assigned to it under Clause 9.1.
Buy Back Start Date shall have the meaning as assigned to it under Clause 9.1.
Business shall mean and include the activities that AZI has been authorized to carry out under the Main Objects clause of the memorandum of association of AZI as on the date of this Agreement.
Business Day means a day (other than a Saturday or Sunday or an official public holiday) on which commercial banks are open for business in New Delhi, Mauritius and New York.
CCDs shall collectively refer to IFC CCDs, IFC II CCDs, IFC III CCDs and DEG CCDs.
CEO shall mean the position of the chief executive officer and/or managing director of the Company or AZI, as the context may require.
CCPS Liquidation Price shall have the meaning assigned to it under Clause 4.1(c).
Chairman shall have the meaning as set forth in Clause 11.7.8.
Competitor shall mean, as of the date of this Agreement, the Persons set out in Schedule N, and shall include such other Persons as may be agreed to in writing by all the Parties.
Control (including with correlative meaning, the terms Controlled by and under common Control with) means the power to direct the management or policies of a Person, directly or indirectly, whether through the ownership of shares or Share Equivalents, by contract or otherwise; provided that, in any event, the direct or indirect ownership of more than 50% (fifty per cent) of the voting share capital of a Person is deemed to constitute Control of that Person.
Corrupt Practice means the following acts:
(i) |
the promise, offering or giving, directly or indirectly, to a Public Official or to any person who directs or works, in any capacity, for a private sector entity, of an undue |
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advantage of any nature, for the relevant person himself or herself or for another person or entity, in order that this person acts or refrains from acting in the exercise of his or her official duties or in breach of his or her legal, contractual or professional obligations having the effect to influence his or her own actions or the ones of another party or entity; |
(ii) | the solicitation or acceptance, directly or indirectly, by a Public Official or by any person who directs or works, in any capacity, for a private sector entity, of an undue advantage of any nature, for the relevant person himself or herself or for another person or entity, in order that this person acts or refrains from acting in the exercise of his or her official duties or in breach of his or her legal, contractual or professional obligations having the effect to influence his or her own actions or the ones of another party or entity. |
Debt shall mean at any time the aggregate of the following:
(i) | the outstanding principal amount or the nominal amount of any debenture, bond, note, loan stock or other similar security under which any indebtedness is incurred; and |
(ii) | any fixed or minimum premium payable on the repayment or redemption or conversion of any instrument. |
Deed of Adherence means a deed of adherence to this Agreement substantially in the form set forth in Schedule A, with applicable amendments which are in form and substance satisfactory to each of the Parties to this Agreement.
DEG CCDs shall mean 680,390 (Six Hundred and Eighty Thousand, Three Hundred and Ninety) compulsorily convertible debentures as issued and allotted to DEG in accordance with the provisions of the DEG Subscription Agreement having an issue price of USD 19.89 (United States Dollars Nineteen and Eighty Nine Cents) each, and carrying interest at the rate of 5% (five per cent) per annum, and with such terms (including conversion) as set out in Schedule H hereto.
DEG CCD Liquidation Price shall mean an amount equal to the DEG Investment Amount plus the DEG Required Return.
DEG Investment Amount shall mean the investment of USD 13,534,712.55 (United States Dollars Thirteen Million, Five Hundred and Thirty Four Thousand, Seven Hundred and Twelve, and Fifty Five Cents) by DEG in the Company made by subscribing to the DEG CCDs in accordance with the terms of the DEG Subscription Agreement.
DEG Required Return shall have the meaning as set forth in paragraph 4.2 (i) (a) of Schedule H.
DEG Securities means the DEG CCDs and the 10 (Ten) Equity Shares issued and allotted to DEG pursuant to the DEG Subscription Agreement.
Director shall mean a director duly appointed on the Board.
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Embargo means any economic sanction aiming at prohibiting the import and/or export (sale, supply, transfer) of one specific or several goods, products or services to or from a country for a specified period as published and amended from time to time by the United Nations, European Union and France.
Encumbrance means any mortgage, charge (fixed or floating), pledge, lien, hypothecation, trust, right of set off or other third party right or interest (legal or equitable) including any right of pre-emption, assignment by way of security, reservation of title or any other security interest of any kind however created or arising or any other agreement or arrangement (including a sale and repurchase arrangement) having a similar effect.
Employees shall mean individuals who are the confirmed/ permanent employees of the Company or AZI, as the context may require.
Equity Securities shall mean Equity Shares and Share Equivalents.
Equity Shares or Shares shall mean ordinary shares of the Company having a par value of USD 0.01(One Cent) each and carrying 1 (one) vote per share.
Existing AZI SHA shall have the meaning as set forth in Recital B.
FATF Recommendations shall mean the recommendations of the Financial Action Task Force (on money laundering).
Financial Year shall mean the financial year of the Company as determined by the Board.
FC Securities shall mean 19,385 (Nineteen Thousand, Three Hundred and Eighty Five) Series A CCPS, 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS, 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS, 53,273 (Fifty Three Thousand, Two Hundred and Seventy Three) Series D CCPS, 53,973 (Fifty Three Thousand, Nine Hundred and Seventy Three) Series F CCPS and 10 (Ten) Equity Shares subscribed by FC pursuant to the FC Subscription Agreement.
Fraudulent Practice refers to any unfair practices (action or omission) intended to deliberately mislead a third party, intentionally conceal elements there from, or betray or vitiate his/her consent, contravening legal or regulatory obligations and/or breaching the Companys or a third party internal rules for the purpose of obtaining an illegitimate benefit.
Fully Diluted Basis means the number of Equity Shares of the Company, calculated as if the then issued and outstanding relevant Share Equivalents (including CCDs and Proparco CCPS) had been exercised and converted in full. For the purpose of this definition, CCDs and Proparco CCPS shall be assumed to be converted in accordance with their respective terms, and in case their respective terms do not specify the manner of valuation of the Company for the provisions of this Agreement for which the Fully Diluted Basis is being ascertained, then the Company shall on a written request of any of the holder of CCDs or Proparco CCPS cause the valuation of the Company to be conducted by any one of the Big Four Accounting Firms and inform the valuation to such holder, which valuation shall be used to determine the conversion of CCDs and/or Proparco CCPS.
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Helion Securities shall mean the 19,385 (Nineteen Thousand, Three Hundred and Eighty Five) Series A CCPS, 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS, 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS, 26,636 (Twenty Six Thousand, Six Hundred and Thirty Six) Series D CCPS, 63,853 (Sixty Three Thousand, Eight Hundred and Fifty Three) Series F CCPS and 10 Equity Shares subscribed by Helion pursuant to the Helion Subscription Agreement.
IFC CCDs shall mean 1,100,000 (One Million and Hundred Thousand) compulsorily convertible debentures as issued and allotted to IFC in accordance with the provisions of the IFC Subscription Agreement having an issue price of USD 4.95 (United States Dollars Four, and Ninety Five Cents) each and carrying interest at the rate of 10% (ten per cent) per annum, and with such terms (including conversion) as set out in Schedule E hereto.
IFC CCD Investment Amount shall mean the investment of USD 5,441,717.91 (United States Dollars Five Million, Four Hundred and Forty One Thousand, Seven Hundred and Seventeen, and Ninety One Cents) by IFC in the Company made by subscribing to the IFC CCDs in accordance with the terms of the IFC Subscription Agreement.
IFC CCD Liquidation Price shall mean the IFC CCD Investment Amount plus the IFC Required Return.
IFC II CCDs shall mean 37,500 (Thirty Seven Thousand and Five Hundred) compulsorily convertible debentures having the issue price of USD 36.85 (United States Dollars Thirty Six, and Eighty Five Cents) each, issued and allotted to IFC in accordance with the provisions of the IFC Subscription Agreement, and with such terms (including conversion) as set out in Schedule I hereto.
IFC II CCDs Investment Amount shall mean the investment of USD 1,381,978.99 (United States Dollars One Million, Three Hundred and Eighty One Thousand, Nine Hundred and Seventy Eight, and Ninety Nine Cents) by IFC in the Company made by subscribing to the IFC II CCDs in accordance with the terms of the IFC Subscription Agreement.
IFC II CCD Liquidation Price shall mean the IFC II CCDs Investment Amount plus the IFC II Required Return.
IFC III CCDs shall mean 36,000 (Thirty Six Thousand) compulsorily convertible debentures having an issue price of USD 83.10 (United States Dollars Eighty Three, and Ten Cents) each, issued and allotted to IFC in accordance with the provisions of the IFC Subscription Agreement, and with such terms (including conversion) as set out in Schedule R hereto.
IFC III CCDs Investment Amount shall mean the investment of USD 2,991,524.02 (United States Dollars Two Million, Nine Hundred and Ninety One Thousand, Five Hundred and Twenty Four, and Two Cents) by IFC in the Company made by subscribing to the IFC III CCDs in accordance with the terms of the IFC Subscription Agreement.
IFC III CCD Liquidation Price shall mean the IFC III CCDs Investment Amount plus the IFC III Required Return.
IFC Required Return shall have the meaning as set forth in paragraph 4.2 (i) (a) of Schedule
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E hereto.
IFC II Required Return shall have the meaning as set forth in paragraph 4.2 (i) (a) of Schedule I hereto.
IFC III Required Return shall have the meaning as set forth in paragraph 4.2 (i) (a) of Schedule R hereto.
IFC Securities shall mean the IFC CCDs, IFC II CCDs, IFC III CCDs, 73,272 (Seventy Three Thousand, Two Hundred and Seventy Two) Series B CCPS, 4,439 (Four Thousand, Four Hundred and Thirty Nine) Series D CCPS, 20,307 (Twenty Thousand, Three Hundred and Seven) Series F CCPS and 10 (Ten) Equity Shares subscribed by IFC pursuant to the IFC Subscription Agreement.
Illicit Origin means funds obtained through: (i) the commission of any predicate offence as designated in the FATF 40 Recommendations Glossary (http://www.fatfgafi.org/pages/glossary/fatfrecommendations/d-i/), (ii) Corrupt Practice, and (iii) if or when applicable, through Fraud against the Financial Interests of the European Communities.
Investor Directors mean the Directors nominated by the Nominating Investors.
Investor Subscription Agreement(s) shall mean any or all of the IFC Subscription Agreement, IFC Subscription Agreement-2, DEG Subscription Agreement, Proparco Subscription Agreement, Proparco Subscription Agreement-2, FC Subscription Agreement, Helion Subscription Agreement or GIF Subscription Agreement (as the context may require).
IRR means internal rate of return determined by using the XIRR function in Microsoft Excel, based on the exact dates of receiving cash flows and exact dates of investing the cash flows.
IPO shall mean the initial public offering of the Equity Shares of the Company.
IPO Failure Date shall have the meaning as set forth in Clause 8.3.
IP Rights shall mean all rights in and in relation to any patent, patent application, know-how, trade mark, trade mark application, trade name, design, copyright domain name or other similar intellectual, industrial or commercial right, and all registrations, extensions and renewals thereof in any part of the world, arising or created for the Company and its Subsidiaries.
Key Managerial Personnel, with respect to the Company and/or AZI (as may be relevant), shall mean the CEO, all Employees directly reporting to the CEO, and such other persons as both the Sponsors and the Investors may agree to designate as such from time to time.
Key Subsidiary or Key Subsidiaries means, at the relevant time:
(i) | AZI; and |
(ii) | each Subsidiary or such Subsidiaries (both direct or indirect) of AZI where, as of the end of the then most recently completed fiscal year of AZI: |
(a) |
the Assets of such Subsidiary or cumulative Assets of such Subsidiaries, as the case may be, account for more than 70% (seventy per cent) of the total |
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consolidated Assets of AZI; or |
(b) | such Subsidiary or such Subsidiaries cumulatively, have earnings before interest, tax, depreciation and amortization representing more than 70% (seventy per cent) of AZIs total consolidated earnings before interest, tax, depreciation and amortization. |
Law includes all applicable statutes, enactments, acts of legislature or parliament, laws, ordinances, rules, bye-laws, regulations, notifications, guidelines, policies, directions, directives and orders of any Authority, tribunal, board, court or recognized stock exchange in force in Mauritius or any other jurisdiction as may be applicable.
Liquidation Event A shall mean any of the following, with respect to the Company or its Subsidiaries, as applicable:
(i) | Compromise or arrangement with the creditors/debtors of the company or failure to pay Debts, under which the company may be wound up under applicable Law; |
(ii) | Appointment of a provisional or official liquidator by an appropriate court under any applicable Law; or |
(iii) | Commencement of any voluntary or involuntary liquidation, dissolution or winding up. |
Liquidation Event B shall mean any of the following, with respect to the Company or its Subsidiaries, as applicable:
(i) | A merger, acquisition, consolidation, or other transaction or series of transactions in which the shareholders of the company following such transaction or transactions will not retain a majority of the voting power of the surviving entity; or |
(ii) | Transfer of all or more than 70% (seventy per cent) in value of the companys Assets. |
Liquidation Preference shall mean the right given to the holders of Equity Securities to receive a return on their investment as provided in Clause 4.1 on the occurrence of Liquidation Event A or Liquidation Event B.
Listing Date shall have the meaning as set forth in Clause 8.1.
Nominating Investor(s) shall mean a reference to GIF, Helion, FC, IFC and Proparco (if eligible under Clause 11.2.2).
OFAC shall mean the United States Office of Foreign Assets Control.
Offering means any primary or secondary, public or private offering of Equity Securities of the Company.
OPIC shall mean Overseas Private Investment Corporation.
Party or Parties shall mean any of the Sponsors, Company and the Investors referred to
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individually or collectively, as the context so requires.
Permitted Transfers shall mean:
(i) | Transfer of 5,000 (five thousand) Equity Shares held by the Sponsors in the Company to the Permitted Transferees, provided that the Permitted Transferee executes a Deed of Adherence and agrees to be bound by the obligations applicable to the Sponsors Equity Shares under this Agreement; or |
(ii) | Transfer of up to 3,127 (three thousand one hundred twenty seven) Equity Shares held by the Sponsors in the Company to Mr. Preet MS Sandhu in the following manner: |
(a) | The transfers shall take place over a period of 4 (four) years, which period shall commence from the date of execution of the SHA; |
(b) | Not more than 782 (seven hundred eighty two) Equity Shares shall be transferred to Mr. Preet MS Sandhu in any 1 (one) year subject to accumulation as below; |
(c) | In a single calendar year, Mr. Preet MS Sandhu shall have the right to exercise his option to purchase the Equity Shares only once, but an un-exercised option may be carried over to the next year; and |
(d) | At the end of the said 4 (four) years, all un-exercised options to purchase the Equity Shares shall lapse. |
Provided that, Mr. Preet MS Sandhu executes the Deed of Adherence and agrees to be bound by the obligations applicable to the Sponsors Equity Shares under this Agreement.
Permitted Transferee means any and all of the following - Hannah Wadhwa, Veer Wadhwa, Harjinder K Wadhwa, Sunbir S Wadhwa, Kulwinder K Wadhwa and Harkanwal Singh Wadhwa.
Person shall mean and include an individual, an association, a corporation, a partnership, a joint venture, a venture capital fund, a trust, an unincorporated organization, a joint stock company or other entity or organization, including a government or political subdivision, or an agency or instrumentality thereof and/or any other legal entity.
Proparco Closing Date shall mean the date on which 10 (ten) Equity Shares, Series E CCPS and Series G CCPS were subscribed by Proparco, and were issued and allotted by the Company, in accordance with the Proparco Subscription Agreement and Proparco Subscription Agreement-2 respectively.
Proparco CCPS shall mean (i) 140,000 (One Hundred and Forty Thousand) Series E CCPS having the issue price of USD 64.71 (United States Dollars Sixty Four and Seventy One Cents) each and such terms (including conversion) as set out in Schedule J hereto, issued and allotted to Proparco in accordance with the provisions of the Proparco Subscription Agreement; and (ii) 18,882 (Eighteen Thousand, Eight Hundred and Eighty Two) Series G CCPS having the issue
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price of USD 450.16 (United States Dollars Four Hundred and Fifty, and Sixteen Cents) each and such terms (including conversion) as set out in Schedule T hereto, issued and allotted to Proparco in accordance with the provisions of the Proparco Subscription Agreement-2.
Proparco CCPS Liquidation Price shall mean an amount that is a sum of (i) the Proparco Investment Amount-1 plus the Proparco Required Return-1 with respect to Series E CCPS, and (ii) the Proparco Investment Amount-2 plus the Proparco Required Return-2, with respect to Series G CCPS.
Proparco Investment Amount-1 shall mean the investment up to USD 9,059,489.89 (United States Dollars Nine Million, Fifty Nine Thousand, Four Hundred and Eighty Nine, and Eighty Nine Cents) by Proparco in the Company made by subscribing to 140,000 (One Hundred and Forty Thousand) Series E CCPS and 10 Equity Shares in accordance with the terms of the Proparco Subscription Agreement.
Proparco Investment Amount-2 shall mean the investment up to USD 8,499,921 (United States Dollars Eight Million, and Four Hundred Ninety Nine Thousand and Nine Hundred Twenty One) by Proparco in the Company made by subscribing to 18,882 (Eighteen Thousand, Eight Hundred and Eighty Two) Series G CCPS in accordance with the terms of the Proparco Subscription Agreement-2.
Proparco Required Return-1 shall have the meaning as set for in paragraph 4.2(i)(a) of Schedule J hereto.
Proparco Required Return-2 shall have the meaning as set out in paragraph 4.2(i)(a) of Schedule T hereto.
Proparco Securities shall mean the 140,000 (One Hundred and Forty Thousand) Series E CCPS and 10 (Ten) Equity Shares subscribed by Proparco pursuant to the Proparco Subscription Agreement.
Public Official means (i) any holder of legislative, executive, administrative or judicial office appointed or elected, serving on a permanent basis or otherwise, paid or unpaid, regardless of rank; (ii) any other person exercising a public function, including for a public agency or company, or providing a public service; and (iii) any other person defined as a public official under the domestic law of the Companys country or Indian law.
QIPO Due Date shall have the meaning as set forth in Clause 7.
QIPO shall mean an IPO which is approved by the Investors, and which satisfies the following conditions:
(i) | The appointment of a merchant banker of international repute, acceptable to the Investors, in connection with the IPO; |
(ii) | The IPO results in the listing of the Companys Equity Shares on the Relevant Market; |
(iii) | The IPO is listed before the QIPO Due Date; |
(iv) |
The gross proceeds from the offer of new or existing Equity Shares in the IPO is not |
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less than USD 100,000,000 (United States Dollars One Hundred Million), which Equity Shares shall be freely tradable on the Relevant Market; and |
(v) | The offering price per Equity Share in the IPO is based on the pre-money valuation of at least USD 450,000,000 (United States Dollars Four Hundred and Fifty Million) of the Company; and |
(vi) | upon the consummation of the IPO, the Equity Shares held by the Investors (including on the conversion of the Equity Securities) shall be tradable on the Relevant Market, unless otherwise agreed by all the Investors; |
regardless of whether or not the Investor chooses to participate through an offer for sale of their Equity Shares in such IPO in the event the foregoing conditions are satisfied.
Registration Rights Agreement shall mean each of the registration rights agreement(s) entered into by the shareholders of the Company setting out the right to have the registration statement filed with respect to the Equity Shares or Equity Securities held by them for resale/make an offering under the Securities Act of 1933, as amended;
Related Agreements shall the Transaction Documents and other agreements and documents as referred in Schedule W;
Relative with reference to any person, shall mean anyone who is related to another if:
(a) | they are members of a Hindu undivided family; |
(b) | they are husband or wife; |
(c) | such person is related to another by being the: |
(i) | Father (including step-father); |
(ii) | Mother (including step-mother); |
(iii) | Son (including step-son); |
(iv) | Sons wife; |
(v) | Daughter; |
(vi) | Daughters husband; |
(vii) | Brother (including step-brother) |
(viii) | Sister (including step-sister) |
Relevant Market shall mean any of the New York Stock Exchange, the NASDAQ Global Market or any other stock exchange that is agreed to by the Investors;
Relevant Parties shall mean the Company, the Sponsors and each of the other Shareholders (other than the Investors) that agree to become a party to this Agreement pursuant to a Deed of Adherence.
Required Return shall mean the IFC Required Return, IFC II Required Return, IFC III Required Return, DEG Required Return, Proparco Required Return-1 or Proparco Required Return-2, as the context may require.
SEC shall mean the United States Securities and Exchange Commission.
Senior Liquidation Price shall mean the IFC CCD Liquidation Price, IFC II CCD
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Liquidation Price, IFC III CCD Liquidation Price, DEG CCD Liquidation Price and Proparco CCPS Liquidation Price, as the context may require.
Series A CCPS shall mean fully paid up compulsorily convertible preference shares having the rights, preferences and privileges as mentioned in Schedule C of this Agreement.
Series A Investment Amount shall mean the aggregate of (a) USD 939,336.42 (United States Dollars Nine Hundred and Thirty Nine Thousand, Three Hundred and Thirty Six, and Forty Two Cents) invested by Helion in the Company in consideration for the subscription of 19,385 (Nineteen Thousand Three Hundred and Eighty Five) Series A CCPS and (b) USD 948,834.43 (United States Dollars Nine Hundred and Forty Eight Thousand, Eight Hundred and Thirty Four, and Forty Three Cents) invested by FC in the Company in consideration for subscription of 19,385 (Nineteen Thousand Three Hundred and Eighty Five) Series A CCPS, in the manner set out in their respective Investor Subscription Agreement.
Series A Liquidation Price shall have the meaning assigned to it under Clause 4.1.
Series B CCPS shall mean fully paid up compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule D of this Agreement.
Series B Investment Amount shall mean the aggregate of (a) USD 4,486,444.56 (United States Dollars Four Million, Four Hundred and Eighty Six Thousand, and Four Hundred and Forty Four, and Fifty Six Cents) invested by IFC in the Company in consideration for the subscription of 73,272 (Seventy Three Thousand, Two Hundred and Seventy Two) Series B CCPS; and (b) USD 3,297,318.79 (United States Dollars Three Million, Two Hundred and Ninety Seven Thousand, and Three Hundred and Eighteen and Seventy Nine Cents) invested by Helion in the Company in consideration for the subscription of 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS and (c) USD 3,295,674.81 (United States Dollars Three Million, Two Hundred and Ninety Five Thousand, Six Hundred and Seventy Four and Eighty One Cents) by FC in the Company in consideration for the subscription of 53,887 (Fifty Three Thousand, Eight Hundred and Eighty Seven) Series B CCPS, in accordance with their respective Investor Subscription Agreement.
Series C CCPS shall mean fully paid up compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule F of this Agreement.
Series C Investment Amount shall mean the aggregate of (a) USD 3,921,899.28 (United States Dollars Three Million, Nine Hundred and Twenty One Thousand, Eight Hundred and Ninety Nine and Twenty Eight Cents) invested by Helion in the Company in consideration for the subscription of 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS; and (b) USD 3,900,891.40 (United States Dollars Three Million, Nine Hundred Thousand, Eight Hundred and Ninety One and Forty Cents) invested by FC in the Company in consideration for the subscription of 114,940 (One Hundred and Fourteen Thousand, Nine Hundred and Forty) Series C CCPS, in accordance with their respective Investor Subscription Agreement.
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Series D CCPS shall mean fully paid up compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule G of this Agreement.
Series D Investment Amount shall mean the aggregate of (a) USD 460,586.12 (United States Dollars Four Hundred and Sixty Thousand, Five Hundred and Eighty Six and Twelve Cents) invested by IFC in the Company in consideration for the subscription of 4,439 (Four Thousand Four Hundred and Thirty Nine) Series D CCPS; (b) USD 2,707,352.27 (United States Dollars Two Million, Seven Hundred and Seven Thousand, Three Hundred and Fifty Two and Twenty Seven Cents) invested by Helion in the Company in consideration for the subscription of 26,636 (Twenty Six Thousand, Six Hundred and Thirty Six) Series D CCPS; and (c) USD 5,415,783.77 (United States Dollars Five Million, Four Hundred and Fifteen Thousand, Seven Hundred and Eighty Three and Seventy Seven Cents) invested by FC in the Company in consideration for the subscription of 53,273 (Fifty Three Thousand, Two Hundred and Seventy Three) Series D CCPS, in accordance with their relevant Investor Subscription Agreement.
Series E CCPS shall mean the fully paid up compulsorily convertible preference shares of the Company having the issue price of USD 64.71 (United States Dollars Sixty Four and Seventy One Cents) each, issued and allotted to Proparco in accordance with the Proparco Subscription Agreement and having the rights, preferences and privileges as mentioned in Schedule J of this Agreement.
Series F CCPS shall mean the fully paid compulsorily convertible preference shares of the Company having the rights, preferences and privileges as mentioned in Schedule S of this Agreement.
Series F Investment Amount shall mean the aggregate of (a) USD 3,708,769.90 (United States Dollars Three Million, Seven Hundred and Eight Thousand, Seven Hundred and Sixty Nine and Ninety Cents) invested by IFC in the Company in consideration for the subscription of 20,307 (Twenty Thousand, Three Hundred and Seven) Series F CCPS; (b) USD 11,861,583.08 (United States Dollars Eleven Million, Eight Hundred and Sixty One, Five Hundred and Eighty Three and Eight Cents) invested by Helion in the Company in consideration for the subscription of 63,853 (Sixty Three Thousand, Eight Hundred and Fifty Three) Series F CCPS; and (c) USD 9,842,686.12 (United States Dollars Nine Million, Eight Hundred and Forty Two Thousand, Six Hundred and Eighty Six and Twelve Cents) invested by FC in the Company in consideration for the subscription of 53,973 (Fifty Three Thousand, Nine Hundred and Seventy Three) Series F CCPS, in accordance with their relevant Investor Subscription Agreement;
Series F Liquidation Price shall have the meaning set forth under Clause 4.1 (c);
Series F Participation shall have the meaning set forth under Clause 4.2 (d);
Series G CCPS shall mean the fully paid compulsorily convertible preference shares of the Company having the issue price of USD 450.16 (United States Dollars Four Hundred and Fifty and Sixteen Cents) each, issued and allotted to Proparco pursuant to the Proparco Subscription Agreement-2 and with such rights, preferences and privileges as mentioned in Schedule T of this Agreement.
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Series H CCPS shall mean the fully paid compulsorily convertible preference shares of the Company having the issue price of USD 450.16 (United States Dollars Four Hundred and Fifty and Sixteen Cents) each and such rights, preferences and privileges as set forth in Schedule U of this Agreement.
Series H CCPS Lock-in Agreement(s) means both of the lock-in agreements dated on or around the date of this Agreement entered into by GIF and IFC with certain other shareholders of the Company for setting out the lock-in obligation for the Equity Shares that will received by GIF and IFC on conversion of Series H CCPS held by them on the occurrence of QIPO;
Series H Investment Amount shall mean the aggregate of (a) USD 49,999,721 (United States Dollars Fourty Nine Million, Nine Hundred and Ninety Nine Thousand, Seven Hundred and Twenty One) invested by GIF in the Company in consideration for the subscription of 111,071 (One Hundred and Eleven Thousand and Seventy One) Series H CCPS in accordance with the GIF Subscription Agreement; and (b) USD 9,999,854 (United States Dollars Nine Million, Nine Hundred and Ninety Nine Thousands, Eight Hundred and Fifty Four) invested by IFC in the Company in consideration for the subscription of 22,214 (Twenty Two Thousand, Two Hundred and Fourteen) Series H CCPS in accordance with the IFC Subscription Agreement-2.
Series H Liquidation Price shall have the meaning set forth in Clause 4.1 (b).
Share Equivalents means preference shares, bonds, debenture, loans, warrants, options or other similar instruments or securities which are convertible into or exercisable or exchangeable for, or which carry a right to subscribe for or purchase, Equity Shares of the Company or any instrument or certificate representing a beneficial ownership interest in the Equity Shares of the Company, including global depositary receipts or American depositary receipts and an instrument representing a Debt.
Shareholder or Shareholders shall mean any Person who holds Equity Securities.
Sponsor Lock-in Agreement shall mean the agreement between, inter alia , GIF, IFC, FC, Helion, IW and IW Green Inc., with respect to the lock-in and distribution of proceeds from the sale of equity shares held by IW Green Inc. in the Company.
Subsidiary shall mean any Person over 50% (fifty percent) of whose share capital is owned, directly or indirectly, by the Company, and shall include AZI and all Subsidiaries of AZI in terms of the Companies Act, 2013 as applicable in the Republic of India. The term Subsidiaries shall be construed accordingly.
Tax shall mean a levy, charge, impost, deduction, withholding or duty of any nature (including stamp and transaction duty and goods and services, value added or similar tax) at any time:
(i) | imposed or levied by any Authority; or |
(ii) | required to be remitted to, or collected, withheld or assessed by any Authority; |
and any related interest, expense, fine, penalty or other charge on those amounts.
17
Third Party Interest shall mean any security interest, lease, license, option, voting arrangement, easement, covenant, notation, restriction, interest under any agreement, interest under any trust, or other right, equity, entitlement or other interest of any nature held by a third party.
Transaction Documents means:
(i) | this Agreement; |
(ii) | the IFC Subscription Agreement; |
(iii) | the IFC Subscription Agreement-2; |
(iv) | the Proparco Subscription Agreement; |
(v) | the Proparco Subscription Agreement-2; |
(vi) | the DEG Subscription Agreement; |
(vii) | the FC Subscription Agreement; |
(viii) | the Helion Subscription Agreement; |
(ix) | the GIF Subscription Agreement; |
(x) | AZI Shareholders Agreement; |
(xi) | Series H CCPS Lock-in Agreements; |
(xii) | Sponsor Lock-in Agreement; |
(xiii) | Registration Rights Agreement; and |
(xiv) | any other documents that may be entered into by the parties therein for the purpose of executing the transactions contemplated in the Transaction Documents. |
Transfer means to transfer, sell, convey, assign, pledge, hypothecate, create a security interest in or Encumbrance on, place in trust (voting or otherwise), transfer by operation of law or in any other way subject to any encumbrance or dispose of, whether or not voluntarily, and shall include reference to any action, which has the effect of creating any Third Party Interest in or over the Equity Securities. Transferable and Transferred shall have corresponding meanings.
USD or $ shall mean United States Dollars, currency of United States of America.
1.2 | Certain terms may be defined elsewhere in this Agreement and wherever, such terms are so defined, they shall have the meaning assigned to them. The terms referred to but not defined in this Agreement, shall have the meaning as defined in the Transaction Documents and failing this shall, unless inconsistent with the context or meaning thereof, bear the same meaning as defined under relevant applicable Law. |
1.3 | All references in this Agreement to statutory provisions shall be construed as meaning and including references to any statutory modification, consolidation or re-enactment (whether before or after the date of this Agreement) for the time being in force, and all statutory instruments or orders made pursuant to such statutory provisions. |
1.4 | Words denoting singular shall include the plural and words denoting any gender shall include all genders unless the context otherwise requires. |
1.5 | References to recitals, clauses or schedules are, unless the context otherwise requires, references to recitals or schedules to, or clauses of this Agreement. |
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1.6 | Any reference to writing shall mean handwritten, printed, typed or electronic mail to reproduce words in permanent visible and legible form. |
1.7 | The terms include and including shall mean include without limitation. |
1.8 | The headings, subheadings, titles, subtitles to clauses, sub-clauses and paragraphs are for information only, shall not form part of the operative provisions of this Agreement or the schedules, and shall be ignored in construing the same. |
1.9 | Any reference to a decision of the Board shall, in the absence of an express statement to the contrary, refer to a simple majority decision of the Board. |
1.10 | If a period of time and dates from a given day or the day of an act or event is specified, it is to be calculated exclusive of that day. |
1.11 | Where the consent or approval of a Party to this Agreement is required hereunder to any act, deed, matter or thing, such requirement shall in the absence of any express stipulation to the contrary herein, mean the prior consent or approval (as the case may be) in writing. |
1.12 | The words directly or indirectly mean directly or indirectly through one or more intermediary persons or through contractual or other legal arrangements, and direct or indirect shall have the correlative meanings. |
2. | EFFECTIVENESS AND SHARE CAPITAL OF THE COMPANY |
2.1 | This Agreement shall come into effect upon the date of the completion of issue and allotment of the Equity Securities by the Company to any of the Investors pursuant to their respective Investor Subscription Agreements ( Effective Date ); provided that this Agreement shall come into effect with respect to an Investor from the date of the completion of the issue and allotment of any Equity Securities by the Company to such Investor pursuant to its respective Investor Subscription Agreement. It is clarified that if the completion of the issue and allotment of Equity Securities for the first time to any specific Investor is completed after the Effective Date, then this Agreement shall be effective with respect to such Investor from the date the issue and allotment of the Equity Securities to such Investor is completed, and not from the above mentioned Effective Date. |
2.2 | All the Investors and Sponsors acknowledge that one or more Investors may subscribe to the Equity Securities pursuant to their respective Investor Subscription Agreements on or after the Effective Date. In this context, the Investors and the Sponsors agree that by execution of this Agreement they have expressly waived their pre-emptive rights relative to the issue and allotment of the Equity Securities to the Investors after the Effective Date pursuant to their respective Investor Subscription Agreements, and have granted their required consents, including pursuant to Clause 11.8, to such issue and allotment of the Equity Securities. |
2.3 | The present paid-up share capital of the Company is USD 1,098.3 (Dollar One Thousand and Ninety Eight, and Three Cents) divided into 109,830 (One Hundred and Nine Thousand, Eight Hundred and Thirty) Equity Shares. The Equity Securities issued and allotted by the Company as on the date of this Agreement is as indicated in the table below:- |
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Name of the Shareholder |
No. of Equity
Shares |
|||
IW Green Inc. |
102,497 | |||
Azure Power Inc. |
5,700 | |||
Satnam Sanghera |
1,633 | |||
|
|
|||
Total |
109,830 | |||
|
|
2.4 | On the completion of the subscription by all Investors in accordance with the respective Investor Subscription Agreements, the Equity Securities issued and allotted by the Company shall be as indicated in the table below: |
Post Series G & H | ||||||||
Name of Party |
Equity
Shares |
Preference Shares |
CCDs |
|||||
International Finance Corporation |
10 |
73,272 Series B CCPS 4,439 Series D CCPS 20,307 Series F CCPS 22,214 Series H CCPS |
1,100,000 IFC CCDs 37,500 IFC II CCDs 36,000 IFC III CCDs |
|||||
Helion Venture Partners II, LLC |
10 |
2,575 Series A CCPS 53,887 Series B CCPS 114,940 Series C CCPS 26,636 Series D CCPS 63,853 Series F CCPS |
| |||||
Helion Venture Partners India II, LLC |
| 16,810 Series A CCPS | | |||||
FC VI India Venture (Mauritius) Ltd. |
10 |
19,385 Series A CCPS 53,887 Series B CCPS 114,940 Series C CCPS 53273 Series D CCPS |
|
20
53,973 Series F CCPS |
||||||||
DEG Deutsche Investitions und Entwicklungsgesellschaft mbH |
10 | | 680,390 DEG CCDs | |||||
Société de Promotion et de Participation Pour la Coopération Économique S.A. |
10 |
140,000 Series E CCPS 18,882 Series G CCPS |
| |||||
IFC GIF INVESTMENT COMPANY I |
111,071 Series H CCPS |
|||||||
IW Green Inc. |
102,497 | | | |||||
Azure Power Inc. |
5,700 | | | |||||
Satnam Sanghera |
1,633 | | | |||||
|
|
|
|
|||||
Total |
109,880 | 964,44 | 1,853,890 | |||||
|
|
|
|
2.5 | Schedule Y of this Agreement sets out the details of the amounts invested by the Investors in the Company. For the purpose of the terms of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series F CCPS as set out in Schedule C, Schedule D, Schedule F, Schedule G and Schedule S respectively, the issue price and the USD-INR conversion rate as referred in such Schedules shall be as set out in Schedule Y of this Agreement. |
3. | REPRESENTATIONS AND WARRANTIES |
3.1 | The Sponsors hereby represent and warrant that: |
(a) | They are collectively represented by IW and all acts, things, actions, decisions and communication by IW on their behalf pursuant to or in connection with this Agreement shall bind them collectively and individually; |
(b) | They have the power and authority to execute and deliver this Agreement and are not prohibited from entering into this Agreement; |
(c) | This Agreement, upon execution and delivery by the Sponsors, will be a legal, valid and binding obligation of each of them enforceable in accordance with its terms; and |
(d) | The execution and delivery of this Agreement by the Sponsors and the promises, agreements or undertakings of the Sponsors under this Agreement do not violate any Law, rule, regulation or order applicable to them or violate or contravene the provisions of or constitute a default under any documents, contracts, agreements or any other instruments which the Sponsors have executed or which are applicable to them. |
3.2 | The Company hereby represents and warrants that: |
(a) | It has the power and authority to execute and deliver this Agreement and is not prohibited from entering into this Agreement; |
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(b) | This Agreement has been duly authorized by the Board and the Shareholders of the Company and upon execution and delivery by the Company, will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms; and |
(c) | The execution and delivery of this Agreement by the Company, and the promises, agreements or undertakings of the Company under this Agreement do not violate any Law, rule, regulation or order applicable to it or violate or contravene the provisions of or constitute a default under any documents, contracts, agreements or any other instruments to which it is a party or which are applicable to it. |
3.3 | Each of the Investors hereby severally represents and warrants that: |
(a) | It has the power and authority to execute and deliver this Agreement and is not prohibited from entering into this Agreement; |
(b) | This Agreement has been duly authorized by it, and upon such execution and delivery, will be a legal, valid and binding obligation enforceable in accordance with its terms; and |
(c) | The execution and delivery of this Agreement by it and the promises, agreements or undertakings of it under this Agreement does not violate any Law, rule, regulation or order applicable to them or violate or contravene the provisions of or constitute a default under any documents, contracts, agreements or any other instruments which it has executed or which are applicable to it. |
4. | RIGHTS OF THE INVESTORS |
4.1 | Liquidation Event A |
(a) | Subject to Clause 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will be entitled to receive in preference to the holders of any other Equity Securities, proceeds representing an amount equal to the IFC CCD Liquidation Price, IFC II CCD Liquidation Price, IFC III CCD Liquidation Price, DEG CCD Liquidation Price and Proparco CCPS Liquidation Price, respectively, pro rata the amounts due to them in this Clause 4.1(a). |
(b) | Subject to Clause 4.1 (a) above and Clause 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of Series H CCPS will be entitled receive in preference to the holders of the Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS), for each of the Series H CCPS held by them, an amount equal to: |
Series H Investment Amount plus an amount that provides a USD return of 8% (eight percent) IRR on the issue price paid by the holders of Series H CCPS to the Company for subscription of the Series H CCPS (Series H Liquidation Price), pro rata the amounts due to them under this Clause 4.1 (b).
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Notwithstanding anything to the contrary contained herein, the rights of the holders of the Series H CCPS shall be subordinate to the rights of the holders of the CCDs, Proparco CCPS in relation to the Liquidation Preferences of the Company.
(c) | Subject to Clause 4.1(a), Clause 4.1 (b) above and Clause 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of the Series F CCPS will be entitled to receive in preference to the holders of the Series B CCPS, Series C CCPS, Series D CCPS, Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS and Series H CCPS), for each of the Series F CCPS held by them, an amount equal to: |
1.5 x (one decimal five times) the price paid by the holders of Series F CCPS to the Company for subscription of the Series F CCPS plus any accrued but unpaid dividends (the Series F Liquidation Price), pro rata the amounts due to them in this Clause 4.1 (c).
Notwithstanding anything to the contrary contained herein, the rights of the holders of the Series F CCPS shall be subordinate to the rights of the holders of the CCDs, Proparco CCPS and Series H CCPS in relation to the Liquidation Preferences of the Company.
(d) | Subject to Clause 4.1(a), Clause 4.1 (b), Clause 4.1 (c) above and Clause 4.2 below, on occurrence of a Liquidation Event A in the Company, the holders of the Series B CCPS, Series C CCPS and Series D CCPS will be entitled to receive in preference to the holders of Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS and Series F CCPS), for each of the Series B CCPS, Series C CCPS and Series D CCPS held by them, an amount equal to: |
2 x (two times) the price paid by each of IFC, Helion and FC to the Company for subscription of the respective Series B CCPS, Series C CCPS and Series D CCPS plus any accrued but unpaid dividends (the Series B Liquidation Price, Series C Liquidation Price and Series D Liquidation Price, as the case may be; and collectively, the CCPS Liquidation Price), pro rata the amounts due to them in this Clause 4.1(d).
Notwithstanding anything to the contrary contained herein, the rights of the holders of the Series B CCPS, Series C CCPS and Series D CCPS shall be subordinate to the rights of the holders of the CCDs, Proparco CCPS, Series H CCPS and Series F CCPS in relation to the Liquidation Preferences of the Company.
(e) |
After the payment to the holders of the CCDs and Proparco CCPS in accordance with Clause 4.1(a) above, the holders of Series H CCPS in accordance with Clause 4.01 (b) above, the holders of the Series F CCPS in accordance with Clause 4.1 (c) above and the holders of the Series B CCPS, Series C CCPS and Series D CCPS in accordance with Clause 4.1 (d) above, on occurrence of a Liquidation Event A in the Company and subject to Clause 4.2 below, the holders of the Series A CCPS will be entitled to receive in preference to the holders of Equity Securities (other than the holders of the CCDs, |
23
Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS) an amount equal to, for each Series A CCPS held by Helion and FC, 2 x (two times) the price paid by Helion and FC to the Company for subscription of the Series A CCPS plus any accrued but unpaid dividends ( Series A Liquidation Price ), pro rata the amounts due to them in this Clause 4.1(e). |
4.2 | Other conditions |
(a) | Liquidation Preferences in Clause 4.1 above will be subject to applicable Law, including, if applicable, the rights of workmen and secured creditors under applicable Law. |
(b) | To the extent that proceeds available for distribution on a Liquidation Event A in the Company are inadequate to pay the Applicable Liquidation Price in full in accordance with Clause 4.1 above, the total amount received and/or realised on such a Liquidation Event A, shall be used in same priority, first: to pay the Senior Liquidation Price to the holders of CCDs and Proparco CCPS (pro rata the amounts due to them in Clause 4.1 (a)), then second: to pay the Series H Liquidation Price to the holders of Series H CCPS (pro rata the amounts due to them in Clause 4.1(b)), then third: to pay the Series F Liquidation Price to the holders of the Series F CCPS (pro rata the amounts due to them in Clause 4.1 (c)), then fourth: to pay the CCPS Liquidation Price to the holders of the Series B CCPS, Series C CCPS and Series D CCPS, respectively, (pro rata the amounts due to them in Clause 4.1(d)), and fifth: to pay the Series A Liquidation Price to the holders of Series A CCPS ( pro rata the amounts due to them in Clause 4.1 (e)). For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by the Investors pursuant to the conversion of the Share Equivalents held by them shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Clause 4.2(b) and such Equity Shares shall not be entitled to Liquidation Preference in Clause 4.1; save and except where the Share Equivalents are converted into Equity Shares of the Company on or immediately prior to and only in connection with the Investors exercising their right upon the occurrence of a Liquidation Event A, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Share Equivalents will be entitled to priority in terms of payment in the like manner as the respective Share Equivalents which were converted into such Equity Shares, as set out in Clause 4.1 and this Clause 4.2(b). |
It is clarified that the Proparco CCPS shall have priority and preference over the Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS and Equity Shares issued by the Company, and the proceeds shall not be distributed to Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS and Equity Shares unless Proparco CCPS has received its applicable Senior Liquidation Price.
(c) | Subject to Clauses 4.2 (d) and (e) below: |
(i) |
to the extent there are additional proceeds available for distribution after payment of the Applicable Liquidation Price to the holders of CCDs, Proparco CCPS, and then Series H CCPS and then Series F CCPS and then the Series B |
24
CCPS, Series C CCPS and Series D CCPS and then Series A CCPS, the holders of Equity Shares will share pro rata in the distribution of such remaining proceeds; and |
(ii) | upon payment of the Applicable Liquidation Price as stated in Clause 4.1 above, the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS shall not be entitled to participate or claim a share in such additional proceeds available for distribution. |
(d) | In case, (i) at least one of the Series A CCPS, Series B CCPS, Series C CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving respective Applicable Liquidation Price in the manner provided in Clause 4.1(d) and Clause 4.1(e) above, as applicable); and (ii) there are additional proceeds available for distribution after payment of the Applicable Liquidation Price to the holders of CCDs, Proparco CCPS, thereafter the Series H CCPS, thereafter the Series F CCPS, thereafter Series B CCPS, Series C CCPS and Series D CCPS and thereafter, Series A CCPS, then the holders of Series F CCPS and the holders of Equity Shares will share pro rata in the distribution of remaining proceeds. Notwithstanding the above, the holders of Series F CCPS shall not be entitled to more than half the price paid by each of their original holders to the Company for subscription of the Series F CCPS (Series F Participation) under this Clause 4.2(d). For the purpose of clarification in relation to this paragraph, upon payment of the Applicable Liquidation Price as stated in Clause 4.1, the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS shall not be entitled to participate or claim a share in such additional proceeds available for distribution. It is further clarified that in relation to this paragraph, the holders of Series F CCPS shall, in no event, be entitled to receive an amount in excess of the Series F Liquidation Price as stated in Clause 4.1 plus the Series F Participation. |
(e) | Upon occurrence of a Liquidation Event A in the Company: |
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective Applicable Liquidation Price in the manner provided in Clause 4.1(d) above) on or immediately prior to the occurrence of a Liquidation Event A, they shall have a right to participate pro rata to their shareholding on an As If Converted Basis in the proceeds available pursuant to the occurrence of Liquidation Event A; and |
(ii) |
if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective Applicable Liquidation Price in the manner provided in Clause 4.1(c) above) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective Applicable Liquidation Price in the manner provided in Clause 4.1(d) above) from the proceeds of the Liquidation Event A is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their respective Applicable Liquidation Price in the manner |
25
provided in Clause 4.1(d) above) if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the Liquidation Differential Amount), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the Liquidation Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to the Series F Participation. It is clarified that:
(i) | the failure of the Sponsors to ensure that the Liquidation Differential Amount is received by IFC (simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation) shall not affect the right of the holders of Series F CCPS to receive amounts pursuant to the Series F Participation; and |
(ii) | unless the Sponsors ensure that the Liquidation Differential Amount is received by IFC simultaneously with the amounts received by the holders of Series F CCPS pursuant to the Series F Participation, the Sponsors shall not receive any amounts from the proceeds upon occurrence of Liquidation Event A. |
(f) | The Sponsors and the Company agree and undertake that they shall honour the Liquidation Preference of first, the holders of CCDs and Proparco CCPS, then second, the holders of the Series H CCPS, then third, the holders of the Series F CCPS, then fourth, the holders of the Series B CCPS, Series C CCPS and Series D CCPS and finally, the holders of Series A CCPS in distributing the proceeds of a Liquidation Event A in any manner legally permissible, including without limitation, re-distribution of proceeds that may be received by the Sponsors on a Liquidation Event A, to the Investors. |
(g) | For the purposes of this Clause 4 (Rights of the Investors ), the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Clause 4.2(g) shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
4.3 | Liquidation Event B in the Company |
The Parties agree that no Liquidation Event B can be completed by the Company unless such transaction has been approved in accordance with Clause 11.8 of this Agreement. If on the occurrence of a Liquidation Event B in relation to the Company, every Investor issues a notice to the Company and the Sponsors, within 30 (thirty) days of any of them coming to be aware of such Liquidation Event B in respect of the Company, asking for the liquidation for the Company and its Subsidiaries, the Parties agree that the Company and its Subsidiaries shall be wound up and the proceeds so realised shall be distributed in order of the preference set out in Clause 4.1 above and will be subject to the terms of Clause 4.2 above. The Parties agree to take all such steps as may be required to ensure compliance of the terms of this Clause 4.
26
4.4 | Liquidation Event A or Liquidation Event B of a Subsidiary (other than a Key Subsidiary) |
The Parties agree that no Liquidation Event B can be completed by a Subsidiary (other than a Key Subsidiary) unless such transaction has been approved in accordance with Clause 11.8 of this Agreement.
Subject to applicable Law, including if applicable, the right of workmen and secured creditors under applicable Law and Clause 4.5, on the occurrence of a Liquidation Event A or a Liquidation Event B in respect of a Subsidiary of the Company, the Parties agree that all proceeds received / available for distribution in respect of such Subsidiary (in case of Azure Power Punjab Private Limited, after payment of proceeds by Azure Power Punjab Private Limited to OPIC in repayment of any loan that may have been taken from OPIC by Azure Power Punjab Private Limited) shall be immediately paid to AZI, along with the other shareholders of such Subsidiary, and the amounts paid to AZI shall not be less than its pro rata share based on its shareholding percentage in such Subsidiary. The entire amount received by AZI from its Subsidiaries shall be immediately paid to the Company, which shall then be distributed to the Investors and the Sponsors in the order of preference set out in Clause 4.1 and Clause 4.2 above. For the purpose of this Clause 4.4, a Subsidiary shall not include a Key Subsidiary.
4.5 | Liquidation Event A or Liquidation Event B of a Key Subsidiary |
In the event of a Liquidation Event A of a Key Subsidiary, the Parties agree that the Company and all the Subsidiaries of the Company will be wound up, and the proceeds of such winding up will be distributed amongst the Shareholders in the manner set out in Clause 4.1 and will be subject to the terms of Clauses 4.2.
The Parties further agree that if on the occurrence of the Liquidation Event B in relation to the Key Subsidiary every Investor issues a notice to the Company and the Sponsors within 30 (thirty) days of any of them coming to be aware of such Liquidation Event B in respect of any Key Subsidiary, asking for the liquidation for the Company and its Subsidiaries, the Company and its Subsidiaries shall be wound up and the proceeds so realised shall be distributed in order of the preference set out in Clause 4.1 above and will be subject to the terms of Clause 4.2. The Parties agree to take all such steps as may be required to ensure compliance of the terms of this Clause 4.
5. | INVESTORS RIGHTS ON FURTHER ISSUE OF SHARES |
5.1 | Offering of New Securities |
5.1.1 | In case of any Offering of New Securities (as defined below), the Sponsors and the Investors shall have the right to purchase the New Securities in proportion to their shareholding in the Company (calculated on an As If Converted Basis) in the manner set out in this Clause 5.1. |
5.1.2 |
If the Company proposes to issue New Securities, it shall give the Sponsors and the Investors a written notice of its intention, describing the New Securities, their price, and their general terms of issuance, and specifying each of the Sponsors and the |
27
Investors pro-rata share of such issuance (the Issue Notice ). The Sponsors and the Investors shall have 25 (twenty five) Business Days after any such notice is delivered (the Notification Date ) to give the Company a written notice that it agrees to purchase part or all of its pro-rata share of the New Securities for the price and on the terms specified in the Issue Notice (the Subscription Notice ). |
5.1.3 | The Company covenants that the price of any such Offering of New Securities shall not be less than the price paid for subscription of Series H CCPS. |
5.1.4 | If any of the Sponsors or the Investors do not issue a Subscription Notice on or prior to the Notification Date or agree to acquire only part of their pro-rata share, then the Company shall by a written notice within 5 (five) Business Days of the expiry of the 25 (twenty five) Business Days period referred to in Clause 5.1.2 above, notify the other Sponsors and the Investors of the number of New Securities not agreed to be purchased by the relevant Sponsor/s or the Investor/s (Unpurchased Securities) and provide them an option to subscribe to the Unpurchased Securities. The Investors, directly or through their Affiliates, and the Sponsors have an option to subscribe to all of the Unpurchased Securities in proportion to their respective shareholding calculated on a As If Converted Basis in accordance with Clause 5.1.5 below, by intimating the Company in this regard within 5 (five) Business Days of receipt of the notice to subscribe to the Unpurchased Securities. In the event if any of the Investors directly or through their Affiliates and the Sponsors are not willing to buy its proportion of the Unpurchased Securities, then the Company will have the option to issue these Unpurchased Securities to any Person as the Board may deem fit. The terms and the price of the Unpurchased Securities being offered to any Person shall be the same as being offered to the Sponsors and Investors in the Issue Notice. |
5.1.5 | On the 35 th (thirty-fifth) Business Day after the issue of the Issue Notice: |
(a) | the Investors (or their Affiliates, as applicable) and/ or the Sponsors shall subscribe for the number of its pro-rata Shares specified in the Subscription Notice and any Unpurchased Securities in accordance with Clause 5.1.4 above; |
(b) | the Sponsors and/ or the Investors (or their Affiliates, as applicable) shall pay the relevant consideration to the Company; |
(c) | the Company shall enter in its share register or register of debenture holders (as applicable) the name of the Sponsors and/ or the Investors and the number of New Securities which have been issued to the Sponsors and/or the Investors; and |
(d) | the Company shall issue new certificates to the Sponsors and/ or the Investors representing the number of New Securities for which the Sponsors and/ or the Investors have subscribed. |
5.1.6 | New Securities shall mean any Shares of the Company or any Share Equivalents; provided, that the term New Securities does not include: |
(a) |
Equity Securities issued or issuable to officers, directors and Employees of, or |
28
consultants to, the Company pursuant to any benefit plan, including employee stock option plan that has been approved by the Board and issued in accordance with Clause 5.2; |
(b) | Equity Securities issued or offered in a QIPO; |
(c) | Shares issuable upon the exercise or conversion of Equity Securities held by the Investors; |
(d) | Shares issued or issuable with prior written and unanimous consent of all the Sponsors and all the Investors where all the Sponsors and all the Investors have approved the terms and price of such issue; |
(e) | Shares issued or issuable in connection with any stock split or stock dividend or like transactions. |
5.1.7 | The Company shall not issue or allot any Equity Securities to any Person who (i) is named on (a) lists promulgated by the United Nations Security Council or its committees pursuant to resolutions issued under Chapter VII of the United Nations Charter; or (b) the World Bank Listing of Ineligible Firms (see www.worldbank.org/debarr); or (c) Financial Sanctions List, or (ii) does not comply with the FATF Recommendations against money laundering and the terrorism financing, or (iii) is named on the Specially Designated Nationals List administered by OFAC or is the target of any economic sanctions administered by OFAC. |
5.2 | EMPLOYEE STOCK OPTION PLAN (ESOP) |
5.2.1 | The option pool shall consist of not more than 35,543 (Thirty Five Thousand, Five Hundred and Fourty Three) Equity Shares of the Company on a Fully Diluted Basis. |
5.2.2 | Any stock options (created in accordance with sub Clause 5.2.1 above) to Employees of the Company or AZI shall be issued in accordance with a stock option plan approved by the Board, under the terms of which the options granted shall vest each year over a 4 (four) year period. Any unvested or unexercised options shall be cancelled and credited back to the option pool. The Employees of the Company or AZI may subscribe to the Equity Shares at par or at premium as per the terms and conditions of the applicable stock option plan. It is clarified that Employees of the Company or AZI to whom Equity Shares are issued under the ESOP would not be required to sign the Deed of Adherence. |
5.2.3 | The Parties agree that any stock option plan that is approved by the Board will include an obligation on the Employees not to Transfer any of the Equity Securities held by them to any of the individuals or entities (i) named on (a) lists promulgated by the United Nations Security Council or its committees pursuant to resolutions issued under Chapter VII of the United Nations Charter; (b) the World Bank Listing of Ineligible Firms (see www.worldbank.org/debarr); (c) the Specially Designated Nationals List administered by OFAC; or (ii) who is the target of any economic sanctions administered by OFAC. Any future stock option plan for Employees/consultants, etc. will contain a similar provision in its terms of issue. |
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5.2.4 | The Parties acknowledge that it is the intention of the Parties to grant stock options to IW for 6,100 (Six Thousand and One Hundred) Equity Shares (ESOP Entitlement) pursuant to the above, subject to the following conditions. In the event of occurrence of QIPO before 31 st December, 2015, the equity shares of AZI held by Azure Power Inc. and Mr. Satnam Sanghera shall be purchased by the Company and the ESOP Entitlement of IW will be reduced by such number of Equity Shares the value of which at the issue price per Equity Share in the QIPO is equal to the amount paid by the Company for the purchase of equity shares of AZI held by Azure Power Inc. and Mr. Satnam Sanghera. If the QIPO does not complete by 31 st December, 2015, the ESOP Entitlement of IW shall stand cancelled and IW shall not be issued any Equity Share for these stock options. |
6. | TRANSFER OF SHARES |
6.1 | Restrictions on Transfer |
6.1.1 | Subject to compliance with this Clause 6.1 ( Restrictions on Transfer ), Clause 6.3 (Transfer by the Investors ), Clause 6.4 (Drag Right of the Investors) and Clause 6.5 ( Drag Right of IFC, DEG and Proparco ), the Equity Securities (or part thereof) held by the Investors shall be freely transferable at all times and to any Person without the prior consent of any other Person, including the Company, other Investors and the Sponsors. The transferee of the Equity Securities shall comply with the know your customer requirements as required by applicable Law before the Company records the transfer of Equity Securities in its statutory registers. |
6.1.2 | The Shareholders of the Company shall not Transfer any of the Equity Securities held by them to any Person (i) who is named on (a) lists promulgated by the United Nations Security Council or its committees pursuant to resolutions issued under Chapter VII of the United Nations Charter; or (b) the World Bank Listing of Ineligible Firms (see www.worldbank.org/debarr); or (c) Financial Sanctions List; or (d) the Specially Designated Nationals List administered by OFAC, or (ii) who does not comply with the FATF Recommendations against money laundering and the terrorism financing, or (iii) who has been found by a judicial or administrative process or who or which is under any administrative, supervisory or criminal inquiry to have committed or engaged in any act given rise to Corrupt Practices, Fraudulent Practices, Anti-Competitive Practices, money laundering or terrorism financing, or (iv) who finances, buys or provides, materials or sectors subject to United Nations, European Union or French Embargo and/or is engaged in any sectors under United Nations, European Union or French Embargo or (v) whose equity, quasi equity and or shareholders loans accounts or associates current accounts are of Illicit Origin, or (vi) who is the target of any economic sanctions administered by OFAC. |
6.1.3 | Any Transfer of Equity Securities attempted in violation of this Clause 6 ( Transfer of Shares) shall be null and void, and shall not be binding upon the Company or the Board and the Company shall not, and each of the Shareholders shall exercise all rights and powers available to it to procure that the Company shall not, reflect on its books any Transfer of Equity Securities to any Person except a Transfer made in accordance with this Clause 6. |
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6.1.4 | No Party to this Agreement may Transfer more than 1% (one per cent) of the outstanding share capital of the Company on a Fully Diluted Basis to any single Person or to a group of Persons who may be related to or are Affiliates of each other unless such Person becomes a party to this Agreement by executing a Deed of Adherence set out in Schedule A to this Agreement. |
6.1.5 | The Company shall record in its share register and register of debenture holders (as applicable) that there are restrictions on the Transfer of the Equity Securities of the Company, and shall make a similar annotation on the certificate(s) for Equity Securities issued by the Company. |
6.1.6 | Each Selling Shareholder (as defined herein) which owns Equity Securities indirectly through one or more holding companies agrees that it will ensure that any disposal of any indirect interest in the Company is consummated as a Transfer of Equity Securities, and not by a sale of any shares or share equivalents of any such holding company, so as to ensure that the Parties will be able to exercise their rights under Clause 6.3 (Transfer by the Investors). It is clarified that the restrictions under this Clause 6.1.6 shall not apply in case of disposal of any indirect interest in the Company due to change in Control of either Helion or FC. |
6.2 | Transfer by Sponsors |
6.2.1 | Except for Permitted Transfers or as provided for under Clauses 6.3.4 (Transfer to Competitor ), 6.4 (Drag Right of the Investors ), 6.5 (Drag Right of IFC, DEG and Proparco ), 6.6 (IFC, DEG and Proparco Call Option) and 7 (Qualified Initial Public Offering) of this Agreement, during the period commencing on the date of this Agreement, and for as long as the Investors hold any Equity Securities in the Company, each of the Sponsors undertake that they shall not directly or indirectly Transfer any of their Equity Securities in any manner whatsoever to any Person (including to their Affiliates or other Sponsors) or create any Encumbrance with respect to any of their Equity Securities (other than a pledge of Equity Securities to help the Company or its Subsidiaries raise Debt if such Debt and its terms have been approved by the Board in accordance with Clause 11.8 (Restrictions on Power of the Board and Shareholders) of this Agreement). |
6.2.2 | Notwithstanding anything contained in this Agreement, if the QIPO/IPO does not complete by the IPO Failure Date, then in the event of transfer of shareholding of the Sponsors in the Company and/or AZI or any IPO of the Company after the IPO Failure Date, the Sponsors shall implement the following: |
(a) |
in the event of transfer of Equity Securities held by the Sponsors pursuant to Clause 6.3.4 (Transfer to Competitor ), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), or otherwise on the transfer of all Equity Securities held by the Sponsors in the Company, or on the occurrence of QIPO or IPO (as relevant) pursuant to Clause 7 (Qualified Initial Public Offering), or on the occurrence of Liquidation Event A or Liquidation Event B, the Sponsors shareholding in AZI shall be bought back by the Company, AZI or any other Person in accordance with the AZI |
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Shareholders Agreement, and any Excess Amount received by the Sponsors (or their Affiliates) from the transfer of their shareholding in AZI shall be distributed between the Sponsors, Helion, FC, GIF and IFC in the proportion set out in Schedule Z hereto; and |
(b) | in the event of transfer of the entire shareholding of AZI to any other Person, or on the occurrence of liquidation or winding-up of AZI, any Excess Amount received by the Sponsors (or their Affiliates) for their shareholding in AZI shall be distributed between the Sponsors, Helion, FC, GIF and IFC in the proportion set out in Schedule Z hereto. |
Helion, FC, GIF and IFC shall be paid their share of the Excess Amount by the Sponsors as determined above, either by payment of immediate available funds to Helion, FC, GIF and IFC of their share of the Excess Amount in a legally permissible method as may be agreed between the Sponsors, Helion, FC, GIF and IFC or, subject to the agreement between the Sponsors, Helion, FC, GIF and IFC, by way of transfer of Equity Securities held by the Sponsors in the Company to Helion, FC, GIF and IFC that corresponds in value to the amounts to be paid by the Sponsors to Helion, FC, GIF and IFC in accordance with the above. It is clarified that the above mentioned distribution by the Sponsors shall be a pre-condition to any transfer by the Sponsors of their Equity Securities in the Company (other than the Permitted Transfers or to Affiliates in accordance with this Agreement) or of their share in AZI.
For the purpose of this Clause 6.2.2, the Excess Amount shall mean any amount received by the Sponsors (or their Affiliates) against Transfer or buyback of their shares in AZI that is more than the face value of those shares, after adjusting for all taxes (including, but not limited to, capital gains tax/income tax as substantiated by actual tax returns filed with tax authorities, and if the actual tax returns cannot be filed, then by a certificate/opinion from a certified chartered accountant who is acceptable to Helion, FC, GIF and IFC) and expenses incurred by the Sponsors in relation to the sale of their shares in AZI.
This Clause 6.2.2 shall cease to apply upon the Transfer by the Sponsors of their entire shareholding in AZI, subject to the fulfilment by the Sponsors of their obligations in this Clause 6.2.2.
6.3 | Transfer by the Investors |
6.3.1 | Subject to compliance with the provisions of Clauses 6.1 (Restrictions on Transfer) and 6.3 (Transfer by the Investors) , the Investors shall, at any time, be entitled to Transfer any Equity Securities held by them in the Company to any third party, provided that the restrictions set out in this Clause 6.3 (Transfer by the Investors ) shall not apply to the transfer of Equity Shares by any Shareholder as part of QIPO/IPO undertaken by the Company. |
6.3.2 | Right of First Offer |
The other Investors and the Sponsors (the Offering Shareholders ) shall have a right of first offer (the Right of First Offer ) with respect to any proposed Transfer of
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Equity Securities ( Transferable Securities ) by any Investor.
(a) | An Investor (the Selling Shareholder ) proposing to Transfer any Transferable Securities shall provide a written notice to the Offering Shareholders of its intention to sell all or part of the Transferable Securities ( Investor Sale Notice). Such Investor Sale Notice shall also include a condition that all and not less than all of the Transferable Securities must be purchased by the Offering Shareholders. |
(b) | The Offering Shareholders, within 15 (fifteen) days of its receipt of the Investor Sale Notice, shall provide a written notice of their intention to purchase, all but not less than all Transferable Securities from the Selling Shareholder in terms of the Investor Sale Notice ( ROFO Exercise Notice) along with the price, on a cash, non-contingent basis, they are willing to pay for the Transferable Securities subject to the Investor Sale Notice ( ROFO Price ). A ROFO Exercise Notice shall be irrevocable and shall constitute a binding offer by the Offering Shareholders to purchase the Transferable Securities under and in accordance with the ROFO Exercise Notice. Each Offering Shareholder shall also provide a copy of its ROFO Exercise Notice to the other Offering Shareholders. |
(c) | Upon the receipt of a ROFO Exercise Notice, and if the ROFO Price and other terms and conditions of the ROFO Exercise Notice are acceptable to the Selling Shareholder, the Selling Shareholder shall, by written notice, inform the Offering Shareholder, whose ROFO Price and other terms and conditions of the ROFO Exercise Notice are acceptable to the Selling Shareholder, within a period of 10 (ten) days from the date of receipt of the. ROFO Exercise Notice, its intention to sell the Transferable Securities ( ROFO Acceptance Notice ) to such Offering Shareholder. Such Offering Shareholders shall, within 25 (twenty five) days from the date of the ROFO Acceptance Notice, consummate the Transfer of the Transferable Securities and pay the ROFO Price. |
(d) | If there are two or more Offering Shareholders, having similar terms in the ROFO Exercise Notice, and whose ROFO Price and other terms and conditions of the ROFO Exercise Notice is acceptable to the Selling Shareholder, then the Selling Shareholder shall issue a ROFO Acceptance Notice to each such Offering Shareholder to acquire a pro-rata portion of the Transferable Securities based on the proportion that each such Offering Shareholders shareholding in the Company bears to the aggregate shareholding in the Company of all the Offering Shareholders that served a ROFO Acceptance Notice on a Fully Diluted Basis. |
(e) |
If the Offering Shareholders have not elected to exercise their Right of First Offer within the period set forth above or if the ROFO Price and other terms and conditions of the ROFO Acceptance Notice are not acceptable to the Selling Shareholder, then subject to Clause 6.3.3 or Clause 6.3.4 (as the case may be), the Selling Shareholder shall be entitled, within 180 (one hundred eighty) Business Days of the Investor Sale Notice, to sell the Transferable Securities stated in the Investor Sale Notice to any third Person, provided the |
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terms offered for the sale of the Transferable Securities to such third Person are no less favourable than those offered by the Offering Shareholders. |
(f) | The Company and the Sponsors hereby undertake to provide all necessary assistance in obtaining and/or making all the required filings, certifications, consents and approvals for consummation of the transfer of the Transferable Securities by the Selling Shareholder to a third Person. |
6.3.3 | Co-Sale Rights |
(a) | In case of proposed Transfer of any Equity Securities held by the Selling Shareholder in the Company to a third Person in accordance with Clause 6.3.2(e), each Investor ( Remaining Investor and if there are more than one Remaining Investor, the Remaining Investors ), shall also have the right, to participate in such Transfer in accordance with this Clause 6.3.3 ( Co-Sale Right ). |
(b) | The Selling Shareholder shall promptly, but in any case upon finalization of the terms of the sale of Transferable Securities, give notice (the Transfer Notice ) to the Remaining Investors. The Transfer Notice shall describe in reasonable detail the proposed Transfer, including but not limited to the number and type of Equity Securities to be transferred, the consideration to be paid by the third party in accordance with Clause 6.3.2 (the Buyer ), other material terms and conditions proposed by the Buyer in respect of the Transfer, and the name and address of each proposed Buyer, accompanied, if available, by a draft share purchase agreement or other information reasonably requested by the Remaining Investors. The Remaining Investors shall have the right to participate in the proposed Transfer (the Tagging Investors ) by giving notice to the Selling Shareholder (a Tag Notice ) within a period of 15 (fifteen) Business Days from receipt of the Transfer Notice (the Exercise Period ), of the number of Equity Securities it wishes to transfer (the Tagged Shares ), subject to Clause 6.3.3 (c). For the avoidance of doubt, the Tagging Investors shall not be obligated to pay any fees or deal expenses of the Selling Shareholder(s) or of any other Person in connection with the exercise of its rights under this Clause 6.3.3. |
(c) | Subject to the next sentences of this Clause 6.3.3 (c) and Clause 6.3.3 (f), the maximum number of Tagged Shares (of each of the Tagging Investor) shall be the number (and if this is not a whole number, such number rounded to the nearest whole number) obtained by multiplying the number of the Shares and/or Share Equivalents of the Company on an As If Converted Basis to be transferred by the Selling Shareholder by a fraction: (i) the numerator of which shall be the number of Shares and/or Share Equivalents of the Company on an As If Converted Basis held by the Tagging Investor as of the date of the Tag Notice; and (ii) the denominator of which shall be the aggregate number of Shares and/or Share Equivalents of the Company on an As If Converted Basis held by all the Investors as of the date of the Tag Notice. |
If by virtue of exercise of the Co-sale Right by any of the Tagging Investor
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under this Clause 6.3.3, the proposed Transfer results in:
(i) | the holding of the Tagging Investor falling below 5% (five per cent) of the share capital of the Company calculated on an As If Converted Basis; or |
(ii) | the holding of all the Investors falling below 10% (ten per cent) of the share capital of the Company calculated on an As If Converted Basis; |
then, the Tagging Investor will be entitled to Transfer all the Equity Securities held by it in the Company to the Buyer and the right of the Selling Shareholder to Transfer any of the Transferable Securities shall stand proportionally reduced.
(d) | Any Transfer by the Tagging Investors shall be made on substantially the same terms and conditions as described in the Transfer Notice. However, the Tagging Investors shall not be required to make any representation or warranty to the Buyer, other than as to good title to the Tagged Shares, absence of liens with respect to the Tagged Shares, customary representations and warranties concerning the Tagging Investors power and authority to undertake the proposed Transfer, and the validity and enforceability of the Tagging Investors obligations in connection with the proposed Transfer. |
(e) | The Selling Shareholders shall have a period of 30 (thirty) Business Days from the expiration of the Exercise Period to Transfer to the Buyer the Transferable Securities originally proposed to be transferred (less the number of Tagged Shares, if any), upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. The Selling Shareholders shall give the Tagging Investor at least 10 (ten) Business Days notice of the proposed date of the Transfer and the Tagging Investor shall Transfer the Tagged Shares to the Buyer at the same time upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. If the Selling Shareholders do not complete the Transfer within such period, any proposed subsequent Transfer by them of some or all of the Equity Securities originally proposed to be transferred shall again be subject to the provisions of Clause 6.3.2 and this Clause 6.3.3. |
(f) | The Selling Shareholders shall not Transfer any of their Equity Securities to the Buyer unless, at the same time, the Buyer purchases all of the Tagged Shares from the Tagging Investors upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. |
(g) |
Notwithstanding anything to the contrary contained herein, but subject to the last sentence of this Clause 6.3.3(g), the holders of the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will not be required to provide the Co-Sale Right to the Remaining Investors while Transferring their respective IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS. The holders of IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will also not be entitled to exercise the Co-Sale Right on |
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the sale of Equity Securities by the other Investors. Provided however that, the holders of the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS will be required to provide the Co-Sale Right to the Remaining Investors and also be entitled to exercise the Co-Sale Right on the sale of Equity Securities by other Investors (other than the holders of IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS, which have not been converted into Equity Shares) with respect to any Equity Shares issued to them after conversion of their respective IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS in accordance with their terms. |
6.3.4 | Transfer to Competitor |
(a) | Notwithstanding anything to the contrary contained herein, in case of any proposed Transfer, at any time prior to the QIPO Due Date, of any Equity Securities held by any or all the Investors (the Selling Shareholder ) in the Company to a Competitor in accordance with Clause 6.3.2(e), resulting in one or more Competitors cumulatively holding more than 50% (fifty per cent) of the entire share capital of the Company (calculated on an As If Converted Basis), the Sponsors and each Investor ( Remaining Investor and if there are more than one Remaining Investor, the Remaining Investors ), shall also have the right ( Co-Sale Right ), to participate in such Transfer in accordance with this Clause 6.3.4 and the provisions of Clause 6.3.3 shall not apply to such Transfer. |
(b) | The Selling Shareholder shall promptly, but in any case upon finalization of the terms of the sale of Transferable Securities, give notice (the Transfer Notice ) to the Remaining Investors and the Sponsors. The Transfer Notice shall describe in reasonable detail the proposed Transfer, including but not limited to the number and type of Equity Securities to be transferred resulting in one or more Competitors cumulatively holding more than 50% (fifty per cent) of the entire share capital of the Company (calculated on an As If Converted Basis), the consideration to be paid by the Competitor in accordance with Clause 6.3.2(e), other material terms and conditions proposed by the Competitor in respect of the Transfer, and the name and address of each proposed Competitor, accompanied, if available, by a draft share purchase agreement or other information reasonably requested by the Sponsors and the Remaining Investors. The Remaining Investors and the Sponsors (the Tagging Shareholders ) shall have the right to participate in the proposed Transfer by giving notice to the Selling Shareholder (a Tag Notice ) within a period of 15 (fifteen) Business Days from receipt of the Transfer Notice (the Exercise Period ), of the number of Equity Securities it wishes to Transfer (the Tagged Shares ), subject to Clause 6.3.4 (c). For the avoidance of doubt, the Tagging Shareholders shall not be obligated to pay any fees or deal expenses of the Selling Shareholder(s) or of any other Person in connection with the exercise of its rights under this Clause 6.3.4. |
(c) |
The Parties agree that each of the Remaining Investors and the Sponsors shall be entitled to exercise their right and participate in this Transfer up to the entire extent of their shareholding in the Company and include in the Tagged Shares |
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all the Equity Securities held by them. |
(d) | If the Sponsors and/or any of the Remaining Investors exercise their right under this Clause 6.3.4, the Competitor shall purchase the Tagged Shares from the Tagging Shareholders. Provided that, if the number of Equity Securities proposed to be acquired by the Competitor in accordance with Clause 6.3.2(e) is not sufficient to acquire all the Tagged Shares, the parties shall not proceed to consummate the transaction. |
(e) | Any Transfer by the Tagging Shareholders shall be made on substantially the same terms and conditions as described in the Transfer Notice. However, the Tagging Shareholders shall not be required to make any representation or warranties to the Competitor, other than as to good title to the Tagged Shares, absence of liens with respect to the Tagged Shares, customary representations and warranties concerning the Tagging Shareholders power and authority to undertake the proposed Transfer, and the validity and enforceability of the Tagging Shareholders obligations in connection with the proposed Transfer. |
(f) | The Selling Shareholders shall have a period of 30 (thirty) Business Days from the expiration of the Exercise Period to Transfer to the Competitor the Transferable Securities, upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. The Selling Shareholders shall give the Tagging Shareholder at least 10 (ten) Business Days notice of the proposed date of the Transfer and the Tagging Shareholder shall Transfer the Tagged Shares to the Buyer at the same time upon the terms and conditions (including consideration for the Transfer) specified in the Transfer Notice. If the Selling Shareholders do not complete the Transfer within such period, any proposed subsequent Transfer by them of some or all of the Equity Securities originally proposed to be transferred shall again be subject to the provisions of Clause 6.3.2, Clause 6.3.3 and Clause 6.3.4. |
6.4 | Drag Right of the Investors |
6.4.1 | Upon the occurrence of the events mentioned in Clause 6.4.2 and subject to all the Investors (other than DEG and Proparco in relation to Clause 6.4.2(e); however, if they agree to exercise the Drag Along Right in relation to Clause 6.4.2(e), then including DEG and Proparco) (the Dragging Investors ) agreeing to exercise their Drag Along Right, all the Dragging Investors shall cumulatively and in conjunction have the right ( Drag Along Right ) to require the Sponsors in writing to sell immediately all the Equity Securities held by the Sponsors along with all the Equity Securities held by all Dragging Investors (the Dragged Securities ) to any third Person (the Dragged Purchaser ). The Sponsors upon receipt of a written notice from the Investors shall be bound to immediately Transfer all the Equity Securities held by the Sponsors to the Dragged Purchaser. For the avoidance of doubt, it is hereby clarified that the provisions of Clause 6.3.4 shall not apply to the sale of Equity Securities to a Competitor under this Clause 6.4, and the transfer restrictions under Clause 6.3 shall not apply to the sale of Equity Securities under this Cause 6.4. |
6.4.2 | The provisions of Clause 6.4.1 shall apply in any of the following circumstances: |
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(a) | If the Company has failed or is unable (for any reason) to effect a buy back in accordance with Clause 9; |
(b) | If the Company has failed or is unable to effect a QIPO in accordance with Clause 7; |
(c) | If the Sponsors are in material breach of the terms of the Transaction Documents, which remains uncured upon the expiry of 15 (fifteen) days, in the collective opinion of the Investors; |
(d) | If the Company or the Sponsors are in material breach of any representation or warranties made by them in the Transaction Documents, which remain uncured upon the expiry of 15 (fifteen) days, in the collective opinion of the Investors; and |
(e) | If there is a breach of the terms the Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS, and such default is not cured, to the joint satisfaction of GIF, IFC, Helion and FC, within a period of 30 (thirty) days. |
6.4.3 | The Parties agree that proceeds from the sale of the Equity Securities of the Company will be distributed in the manner such that: |
(i) | the holders of the CCDs and Proparco CCPS will be entitled to receive in preference to the holders of any other Equity Securities, proceeds representing an amount equal to their respective Senior Liquidation Price, pro rata the amounts due to them in this Clause 6.4.3(i); |
(ii) | subject to Clause 6.4.3 (i) above and Clause 6.4.4 below, the holders of the Series H CCPS will be entitled to receive in preference to the holders of the Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS and Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS), for each of the Series H CCPS held by them, an amount equal to the Series H Liquidation Price. |
(iii) | Subject to Clause 6.4.3 (i), Clause 6.4.3 (ii) above and Clause 6.4.4 below, the holders of the Series F CCPS will be entitled to receive in preference to the holders of the Series B CCPS, Series C CCPS and Series D CCPS and Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS and Series H CCPS), for each of the Series F CCPS held by them, an amount equal to: |
the 1.5 x (one decimal five times) the price paid by the holders of Series F CCPS to the Company for subscription of the Series F CCPS plus any accrued but unpaid dividends, pro rata the amounts due to them in this Clause 6.4.3 (iii).
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(iv) | Subject to Clause 6.4.3 (i), Clause 6.4.3 (ii), Clause 6.4.3 (iii) above and Clause 6.4.4 below, the holders of the Series B CCPS, Series C CCPS and Series D CCPS will be entitled to receive in preference to the holders of Series A CCPS and other Equity Securities issued by the Company (other than the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS and Series F CCPS), for each of the Series B CCPS, Series C CCPS and Series D CCPS held by them, an amount equal to: |
2 x (two times) the price paid by each of IFC, Helion and FC to the Company for subscription of the respective Series B CCPS, Series C CCPS and Series D CCPS plus any accrued but unpaid dividends, pro rata the amounts due to them in this Clause 6.4.3(iv).
(v) | After the payment to the holders of the CCDs and Proparco CCPS, in accordance with Clause 6.4.3(i) above, holders of the Series H CCPS in accordance with Clause 6.4.3 (ii), holders of the Series F CCPS in accordance with Clause 6.4.3 (iii) above and to the holders of the Series B CCPS, Series C CCPS and Series D CCPS in accordance with Clause 6.4.3 (iv) above, the holders of the Series A CCPS will be entitled to, receive in preference to the holders of Equity Securities (other than the holders of the CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS) an amount equal to, for each Series A CCPS held by Helion and FC, 2 x (two times) the price paid by Helion and FC to the Company for subscription of the Series A CCPS plus any accrued but unpaid dividends, pro rata the amounts due to them in this Clause 6.4.3(v). |
6.4.4 | To the extent that proceeds on sale of Equity Securities of the Company are inadequate to pay to the holders of the Equity Securities in accordance with the provisions of Clause 6.4.3, the total amount received and/or realised shall be used in the same priority between first: to pay the holders of CCDs and Proparco CCPS (pro rata the amounts due to them in Clause 6.4.3(i)), then second: to pay the holders of the Series H CCPS (pro rata the amounts due to them in Clause 6.4.3(ii)), then third: to pay the holders of the Series F CCPS (pro rata the amounts due to them in Clause 6.4.3(iii)), then fourth: to pay the holders of the Series B CCPS, Series C CCPS and Series D CCPS (pro rata the amounts due to them in Clause 6.4.3(iv)) and finally to pay the holders of Series A CCPS (pro rata the amounts due to them in Clause 6.4.3(v)). |
6.4.5 | Subject to Clause 6.4.6 and Clause 6.4.7 below: |
(i) | to the extent there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS and then Series H CCPS and then Series F CCPS and then the Series B CCPS, Series C CCPS and Series D CCPS and then Series A CCPS in accordance with Clause 6.4.3 above, the holders of Equity Shares will share pro rata in the distribution of such remaining proceeds; and |
(ii) |
upon receipt by the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS of their full entitlement in accordance with Clause 6.4.3 above, they shall not be entitled to |
39
participate or claim a share in such additional proceeds available for distribution. |
6.4.6 | In case, (i) at least one of the Series A CCPS, Series B CCPS, Series C CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Clause 6.4.3); and (ii) there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS in the manner provided in Clause 6.4.3, then the holders of Series F CCPS and the holders of Equity Shares will share pro rata in the distribution of remaining proceeds. Notwithstanding the above, the holders of Series F CCPS shall be entitled to an amount not more than the Series F Participation under this Clause 6.4.6. It is clarified that the holders of Series F CCPS shall, in no event, be entitled to receive an amount in excess of 150% (one hundred and fifty percent) of the Series F Investment Amount plus the Series F Participation. |
6.4.7 | Upon the exercise of the Drag Along Right by the Investors: |
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Clause 6.4.3) on or immediately prior to the exercise of the Drag Along Right by the Investors, in order to participate pro rata to their shareholding on an As If Converted Basis in the proceeds available from the sale of Equity Securities to the Dragged Purchaser; and |
(ii) | if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective entitlement in the manner provided in Clause 6.4.3) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective entitlement in the manner provided in Clause 6.4.3) from the proceeds available from the sale of Equity Securities to the Dragged Purchaser is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their share in proceeds available from the sale of Equity Securities to the Dragged Purchaser), if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the Drag Differential Amount ), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the Drag Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation.
6.4.8 | The Parties agree that they shall enter into necessary documents with the Dragged Purchaser, or undertake such actions in any manner legally permissible, including without limitation, re-distribution of proceeds that may be received by the Parties, in order to comply with the provisions of this Clause 6.4. |
6.4.9 |
For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by the Investors pursuant to the conversion of the Share Equivalents held by them |
40
shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Clause 6.4 and such Equity Shares shall not be entitled to preference in Clause 6.4.3; save and except where the Share Equivalents are converted into Equity Shares of the Company on or immediately prior to and only in connection with the Investors exercising their right under this Clause 6.4, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Share Equivalents will be entitled to priority in terms of payment and sale in the like manner as the respective Share Equivalents which were converted into such Equity Shares, as set out in Clause 6.4. |
6.4.10 | For the purposes of this Clause 6.4, the calculation of entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Clause 6.4.10 shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
6.5 | Drag Right of IFC, DEG and Proparco |
6.5.1 | Upon the occurrence of the events mentioned in Clause 6.5.2, IFC, DEG or Proparco (other than DEG and Proparco in relation to events set out in Clause 6.5.2(a); and other than IFC and Proparco in relation to events set out in Clause 6.5.2(e); and other than IFC and DEG in relation to events set out in Clause 6.5.2(f)) (the Selling Investors ) , either independently or along with any other of them, may without any consent from the other Investors require the Sponsors by issuance of a written notice to them to sell immediately all the Equity Securities held by the Sponsors (the Sponsor Dragged Securities ) to (i) the other remaining Investors in accordance with Clause 6.3.2 or (ii) any third Person (the Drag Purchaser ) along with the Equity Securities of the Selling Investors. The Sponsors upon receipt of a written notice from the Selling Investors shall be bound to immediately Transfer the Sponsor Dragged Securities to the Drag Purchaser. |
In the event the Selling Investors exercise their rights under this Clause 6.5.1 to Transfer the Sponsor Dragged Securities to a Drag Purchaser, each of the other remaining Investors shall have a right to participate in this Transfer and Transfer their Equity Securities up to the entire extent of their shareholding in the Company ( Tag Along Right ) and the Selling Investors shall be required to ensure that the Drag Purchaser acquires the Equity Securities from the other remaining Investors on substantially the same terms and conditions (subject to the succeeding paragraph and Clause 6.5.3) on which it proposed to acquire the Sponsor Dragged Securities. For the avoidance of doubt, it is hereby clarified that the provisions of Clause 6.3.4 shall not apply to a Transfer of Equity Securities to a Competitor pursuant to this Clause 6.5, and the transfer restrictions under Clause 6.3 shall not apply to the sale of Equity Securities under this Cause 6.5.
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Notwithstanding anything to the contrary contained in this Clause 6.5.1, the Parties agree that if the number of Equity Securities proposed to be acquired by the Drag Purchaser is not sufficient to acquire all the Equity Securities from the Selling Investors, Sponsors and remaining Investors (to the extent they wish to exercise their Tag Along Right), the Parties agree that the Drag Purchaser shall purchase such number of the Equity Securities in the following order of priority:
(i) | firstly, it shall purchase the IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS on a pro rata basis; |
(ii) | secondly, it shall purchase the Series H CCPS on a pro rata basis; |
(iii) | thirdly, it shall purchase the Series F CCPS on a pro rata basis; |
(iv) | fourthly, it shall purchase the Series B CCPS, Series C CCPS and Series D CCPS on a pro rata basis; |
(v) | fifthly, it shall purchase the Series A CCPS from Helion and FC on a pro rata basis; and |
(vi) | lastly, upon purchase of the IFC CCDs, IFC II CCDs, IFC III CCDs, the DEG CCDs, Proparco CCPS, the Series H CCPS, the Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS in accordance with the terms of this Clause, it shall acquire the Equity Securities from the Sponsors and other Equity Securities issued by the Company that have not been mentioned above, on a pro rata basis. |
6.5.2 | The provisions of Clause 6.5.1 shall apply in the following circumstances: |
(a) | If there is a material breach of the IFC Policy Covenants as set out in Schedule K to this Agreement; or |
(b) | If there is a breach of the terms of the CCDs or Proparco CCPS and such default is not cured, to the sole satisfaction of their holders, within a period of 30 (thirty) days; or |
(c) | If the Company defaults on payment of interest on CCDs or Proparco CCPS and such default is not cured, to the sole satisfaction of their respective holders, within a period of 10 (ten) days; or |
(d) |
If upon conversion (where the conversion ratio for the CCDs and Proparco CCPS is as provided in Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T), the CCDs and Proparco CCPS do not give their holders (IFC, DEG and/ or Proparco) their respective Required Return, and if the IFC/DEG/ Proparco Buy Back Option (referred in Clause 9A.1) or the Deficit Call Option (referred in Clause 6.6) are not consummated for any reason whatsoever. For the purposes of the above conversion, the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2 |
42
(i)(c) under Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, respectively; or |
(e) | If the Company or any of its Subsidiaries engage in any of the activities as set out in Schedule O to this Agreement; or |
(f) | If there is a breach of the Proparcos policy covenants as set out in Schedule P to this Agreement. |
6.5.3 | Notwithstanding anything to the contrary contained in Clause 6.5.1, the Parties agree that the proceeds from the sale of the Equity Securities of the Company to the Drag Purchaser shall be distributed in the following manner: |
(i) | firstly, the holders of IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS shall be entitled to receive in preference to the holders of other Equity Securities amounts up to their Senior Liquidation Price; |
(ii) | secondly, the holders of the Series H CCPS, shall be entitled to receive in preference to the holders of the other Equity Securities (other than IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS), amounts up to the Series H Liquidation Price; |
(iii) | thirdly, the holders of the Series F CCPS, shall be entitled to receive in preference to the holders of the other Equity Securities (other than IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS and Series H CCPS), amounts up to the Series F Liquidation Price; |
(iv) | fourthly, the holders of Series B CCPS, Series C CCPS and Series D CCPS shall be entitled to receive in preference to the holders of Series A CCPS and other Equity Securities issued by the Company (other than IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS and Series F CCPS) amounts up to their Applicable Liquidation Price; and |
(v) | fifthly, the holders of Series A CCPS shall be entitled to receive in preference to the holders of Equity Securities issued by the Company (except IFC CCDs, IFC II CCDs, IFC III CCDs, DEG CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS and Series D CCPS) amounts up to their Applicable Liquidation Price. For the purpose of clarification, upon payment of the Applicable Liquidation Price as stated in Clause 4.1, the holders of the CCDs and Proparco CCPS shall not be entitled to any other amount from the balance proceeds available for distribution. |
6.5.4 |
To the extent that proceeds on sale of Equity Securities of the Company are inadequate to comply with the provisions of Clause 6.5.1 and Clause 6.5.3, the total amount received and/or realised shall be used in same priority first: to pay the holders of CCDs and Proparco CCPS (pro rata to the amounts due to them), then second: to pay the holders of the Series H CCPS (pro rata to the amounts due to them), then third: to pay the holders of the Series F CCPS (pro rata to the amounts due to them), then fourth: to pay the holders of the Series B CCPS, Series C CCPS and Series D CCPS and finally |
43
to pay the holders of Series A CCPS. It is clarified that if any Equity Securities are not sold to the Drag Purchaser, then the holders of such Equity Securities shall not be entitled to distribution in accordance with this Clause 6.5. |
6.5.5 | Subject to Clause 6.5.6 and Clause 6.5.7 below: |
(i) | to the extent there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS and then Series H CCPS and then Series F CCPS and then the Series B CCPS, Series C CCPS and Series D CCPS and then Series A CCPS in accordance with Clause 6.5.3 above, the holders of Equity Shares will share pro rata in the distribution of such remaining proceeds; and |
(ii) | upon receipt by the holders of CCDs, Proparco CCPS, Series H CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS of their full entitlement in accordance with Clause 6.5.3 above, such holders shall not be entitled to participate or claim a share in such additional proceeds available for distribution. |
6.5.6 | In case, (a) at least one of the Series A CCPS, Series B CCPS, Series C CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Clause 6.5.3); and (b) there are additional proceeds available for distribution after payment to the holders of CCDs, Proparco CCPS, Series H CCPS, Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS in the manner provided in Clause 6.5.3, then the holders of Series F CCPS and the holders of Equity Shares will share pro rata in the distribution of remaining proceeds. Notwithstanding the above, the holders of Series F CCPS shall be entitled to an amount not more than the Series F Participation under this Clause 6.5.6. It is clarified that the holders of Series F CCPS shall, in no event, be entitled to receive an amount in excess of 150% (one hundred and fifty percent) of the Series F Investment Amount plus the Series F Participation. |
6.5.7 | Upon the exercise of the drag right by IFC, DEG or Proparco, and the Tag Along Right by the remaining Investors, if applicable, pursuant to this Clause 6.5: |
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Clause 6.5.3) on or immediately prior to the exercise of the drag right by IFC, DEG or Proparco or the exercise of Tag Along Right by the other Investors, in order to participate pro rata to their shareholding on an As If Converted Basis in the proceeds available from the sale of Equity Securities to the Drag Purchaser; and |
(ii) |
if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective entitlement in the manner provided in Clause 6.5.3) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective entitlement in the manner provided in Clause 6.5.3) from the proceeds available from the sale of Equity Securities to the Drag Purchaser is less than |
44
the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their share of the proceeds available from the sale of Equity Securities to the Drag Purchaser), if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the IFC Differential Amount ), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the IFC Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation.
6.5.8 | The Parties agree that they shall enter into necessary documents with the Drag Purchaser in order to comply with the provisions of this Clause 6.5. The Sponsors, Helion and FC agree that the exercise by IFC, DEG and/or Proparco of the Drag Right under this Clause 6.5, is without prejudice to IFCs, DEGs or Proparcos right under Law to proceed against the Sponsors, Helion and FC for a breach of their obligation to honour the Deficit Call Option in terms of Clause 6.6. |
6.5.9 | For the avoidance of doubt, it is hereby clarified that the Equity Shares of the Company held by the Investors pursuant to the conversion of the Share Equivalents held by them, shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Clause 6.5 and such Equity Shares shall not be entitled to preference in Clause 6.5.3; save and except where the Share Equivalents are converted into Equity Shares of the Company on or immediately prior to and only in connection with the Investors exercising their right under this Clause 6.5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Share Equivalents will be entitled to priority in terms of payment and sale in the like manner as the respective Share Equivalents that were converted into such Equity Shares, as set out in this Clause 6.5. |
6.5.10 | For the purposes of this Clause 6.5, the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Clause 6.5.10 shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
6.6 | IFC, DEG and Proparco Call Option |
6.6.1 |
If upon conversion (where the conversion ratio for the CCDs and Proparco CCPS is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, as applicable), the CCDs and Proparco CCPS do not give their holders (i.e. IFC, DEG and/or Proparco) their respective Required Return and if the Company has failed or is unable (for any reason) to effect a buy back in accordance with Clause 9A.1 that provides the holders of the CCDs and Proparco CCPS (or Equity Shares obtained upon their conversion) their respective Required Return, then each of |
45
IFC, DEG and Proparco in its discretion shall have the option ( Deficit Call Option ; and IFC, DEG and/or Proparco, who are exercising such Deficit Call Option, shall be referred to as the Call Purchaser(s) ), but not the obligation, to require any or all of the Sponsors, Helion and FC to sell to such Call Purchaser (or its nominee) on a pro rata basis such number of Equity Securities ( Deficit Option Securities ) held by the Sponsors, Helion and FC as are necessary to meet the shortfall in the Required Return, at the lowest price permissible under Law ( Deficit Call Option Price ). |
For the purposes of the above, the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2(i) (b) under Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, as applicable. The Deficit Call Option shall be exercised by IFC, DEG and/or Proparco in accordance with the procedure set out in Clause 6.6.2. It is clarified that IFC, DEG and/or Proparco, on being entitled to exercise the Deficit Call Option, chooses to exercise the same, it shall be bound to exercise it such that Helion and FC are not called upon to transfer any Equity Securities held by them that is greater than the number of Equity Securities pro rata to the Equity Securities held by the Sponsors determined on a Fully Diluted Basis and the Deficit Call Option Notice shall be issued accordingly.
6.6.2 | IFC, DEG and/or Proparco shall exercise the Deficit Call Option by providing the Sponsors, Helion and FC a written notice ( Deficit Call Option Notice ) of its intention to exercise the Deficit Call Option. The Deficit Call Option Notice shall set out the number of Deficit Option Securities to be sold by each Sponsor, Helion and FC, the sale price for each Deficit Option Security and the date ( Call Settlement Date ) on which the Sponsors, Helion and FC shall sell the Deficit Option Securities to the Call Purchasers. |
6.6.3 | The issuance of the Deficit Call Option Notice shall constitute a valid and binding agreement between the Call Purchaser, the Sponsors, Helion and FC for the purchase by the Call Purchaser of the Deficit Option Securities, as applicable, held by the Sponsors, Helion and FC as mentioned in the Deficit Call Option Notice. On the Call Settlement Date, the Sponsors, Helion and FC shall sell the Deficit Option Securities to the Call Purchaser by delivery of the certificates representing the Deficit Option Securities (free and clear from all Encumbrances), together with duly executed forms of transfer in respect of the Deficit Option Securities to the Call Purchaser; and the Call Purchaser shall purchase the Deficit Option Securities from the Sponsors, Helion and FC and pay therefore in full, the applicable Deficit Call Option Price. |
6.6.4 | The Company, the Sponsors, Helion and FC undertake to provide all necessary assistance in obtaining and/or making all the required filings, certifications, consents and approvals for consummation of the Deficit Call Option. Further, if required by the Call Purchaser, Helion and FC undertake that, prior to the sale of the Deficit Option Securities, they shall convert, into Equity Shares of the Company, such number of Equity Securities held by them as are necessary for transfer to the Call Purchasers of their pro rata share of the Deficit Option Securities. |
6.6.5 |
For the avoidance of doubt, upon the completion of the sale of the Deficit Option Securities, the Sponsors, Helion and FC shall relinquish, and shall no longer be entitled |
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to any dividends, profits, retained earnings of the Company or similar rights that attach to the Deficit Option Securities so transferred to the Call Purchaser pursuant to the Deficit Call Option. |
6.6.6 | For the purposes of this Clause 6.6, the entitled returns of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. |
6.7 | Sponsors, Helion and FC Call Option |
6.7.1 | If upon conversion (where the conversion ratio for the CCDs and the Proparco CCPS is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, as applicable), the CCDs and Proparco CCPS give to their holders (i.e., IFC, DEG and/or Proparco) a return in excess of their respective Required Return, and if the Company does not effect a buy back in accordance with Clause 9A.2, then after a period of 15 (fifteen) Business Days from the conversion of the CCDs and/or Proparco CCPS, as applicable, the Sponsors, Helion and FC, in their discretion shall have the option ( Call Option ), but not the obligation, to require IFC, DEG and/or Proparco, who have received a return in excess of its Required Return ( Call Option Seller(s) ), to sell to them (on a pro rata basis based on the shareholding of the Sponsors, FC and Helion in the Company on a Fully Diluted Basis at that time) such number of Equity Shares ( Option Shares ) as is required to reduce Call Option Sellers shareholding to such percentage as is adequate to give the Call Option Seller its respective Required Return. It is clarified that the right of Sponsors, Helion and FC to exercise the Call Option in accordance with this Clause 6.7 is several and may be exercised at the individual discretion of each of Sponsor, Helion or FC. It is further clarified that the determination of return received by the Call Option Sellers under this Clause 6.7.1 shall be based on the Equity Shares received by them on conversion of the CCDs or Proparco CCPS, as the case may be, and the value at which such Equity Shares are issued on the conversion of such CCDs or Proparco CCPS. |
For the purposes of the above conversion, the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2(i)(b) of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, as applicable. The transfer of the Option Shares pursuant to the Call Option shall be at the lowest price permissible under Law ( Call Option Price ). The Call Option shall be exercised by the Sponsors, Helion and FC in accordance with the procedure set out in Clause 6.7.2.
6.7.2 | The Sponsors, Helion and FC shall exercise the Call Option by providing the Call Option Seller a written notice ( Call Option Notice ) of their intention to exercise the Call Option, within 15 (fifteen) Business Days from the expiry of the 15 Business Days period mentioned in Clause 6.7.1. The Call Option Notice shall set out the number of Option Shares (on a pro rata basis) to be sold by the Call Option Seller to the Sponsor, Helion and FC, the sale price for each Option Share and the date ( Settlement Date ) on which the Call Option Seller shall sell the Option Shares. |
6.7.3 |
The issuance of the Call Option Notice shall constitute a valid and binding agreement between the Call Option Seller and the Sponsor, Helion and FC for the purchase by the Sponsor, Helion and FC of the Option Shares as mentioned in the Call Option Notice. On the Settlement Date, the Call Option Seller shall sell the Option Shares to the Sponsor, Helion and FC by delivery of the certificates representing the Option Shares (free and clear from all Encumbrances), together with duly executed forms of transfer |
47
in respect of the Option Shares to the Sponsor, Helion and FC and the Sponsor, Helion and FC shall purchase the Option Shares from the Call Option Seller and pay therefore in full, the applicable Call Option Price. |
6.7.4 | If a Sponsor or either of Helion and FC: (a) does not exercise its Call Option within the period set forth above; or (b) exercises its Call Option but does not consummate the purchase of the Option Shares on the Settlement Date, then the other Sponsors and either of Helion and FC shall be entitled to purchase (on a pro rata basis) on the terms and conditions set out in this Clause 6.7, the balance Option Shares. |
6.7.5 | For the avoidance of doubt, upon the completion of the sale of the Option Shares, the Call Option Sellers shall relinquish, and shall no longer be entitled to any dividends, profits, retained earnings of the Company or similar rights that are attached to the Option Shares so transferred to the Sponsor, Helion and FC (as the case may be) pursuant to the Call Option. |
6.7.6 | For the purposes of this Clause 6.7, the entitled returns of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. |
6.8 | For the avoidance of doubt, it is also clarified that nothing contained in Clause 6.6 and Clause 6.7: |
(a) | shall be construed as imposing any restrictions on the transferability of Equity Securities held by Helion and FC which shall continue to remain freely transferable in accordance with this Agreement; and |
(b) | shall be construed as otherwise affecting any of the terms of the Series A CCPS or Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and Series H CCPS as contained in Schedule C, Schedule D, Schedule F, Schedule G and Schedule S and Schedule U respectively, except to the extent specified in this Agreement. |
It is further clarified that the restrictions on transfer under Clause 6.3 shall not apply on the transfer of Equity Shares pursuant to Clause 6.6 and Clause 6.7.
6.9 | Notwithstanding anything to the contrary contained herein, the Parties agree that calculation of the Series F Liquidation Price, CCPS Liquidation Price or the Series A Liquidation Price will be done taking into account the Series F CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series A CCPS, respectively, held by Helion and FC prior to the exercise of the Deficit Call Option and the Call Option under Clause 6.6 and Clause 6.7. |
7. | QUALIFIED INITIAL PUBLIC OFFERING |
7.1 | The Company shall use its best endeavours, and the Sponsors undertake to cause the Company to make best endeavours to, conduct the QIPO, and to list the Equity Securities of the Company on a Relevant Market, on or prior to February 25, 2016 ( QIPO Due Date ), or such other date agreed to in writing by the Investors. |
7.2 |
The Company shall not conduct an IPO other than any IPO approved by all Investors or the QIPO before the QIPO Due Date. Notwithstanding anything to the contrary contained in the |
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foregoing provisions of this Clause 7.1, the Investors shall jointly have the right to provide a notice to the Company requiring it to take necessary steps to undertake the QIPO or IPO of the Company, requiring the listing of the Equity Securities (as converted) held by the Investors, on the Relevant Market (the Demand Notice ) within a period of 180 (one hundred and eighty) days from the date of the Demand Notice. If the Demand Notice is with respect to an IPO, the provisions of Clause 7.3 to Clause 7.10 shall mutatis mutandis apply with respect to such IPO, and reference to the term QIPO shall be construed as reference to the term IPO. |
7.3 | If requested by one or more Investors, the QIPO undertaken by the Company under this Clause 7 shall be through an offer for sale, or a combination of a new issue and an offer for sale, of Equity Securities. In such a scenario (i) the Investors may offer their respective shareholdings in the Company on a pro rata basis calculated on a Fully Diluted Basis, and (ii) the Equity Securities offered by the Investors shall be offered for sale in the QIPO prior to the offer for any new Equity Shares to be issued by the Company in the QIPO. If the Investors offer their Equity Securities in any offer for sale, the Sponsors and the Company hereby confirm and undertake to do the following: |
(a) | Ensure that the total offer of Equity Securities to the public shall constitute not less than such percentage (as prescribed under the prevalent rules and Laws) of the total post issue paid-up share capital to comply with the listing requirements of the Relevant Market; |
(b) | Provide all material information and ensure compliance with all applicable provisions under the guidelines, the listing agreement of the Relevant Market and other regulations existent at the time of the QIPO and subsequent listing of the Equity Securities of the Company for trading on a Relevant Market; |
(c) | The Relevant Market(s) on which the Equity Securities offered by the Investors shall be listed, the timing, pricing, appointment of the lead manager, the underwriter and the appointment of an investment bank of international repute as book runner for the offering shall be mutually agreed amongst the Investors, the Sponsors and the Company; and |
(d) | In the event of an offer for sale in which the Investors offer their Equity Securities, and subject to the Investors providing the Company with requisite authority, the Company agrees to indemnify and hold harmless the Investors for including their Equity Securities in such secondary offering, from and against losses caused by any untrue statement of a material fact contained in any statement or prospectus relating to such secondary offering, or caused by any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses are caused by any such untrue statement or omission based upon information furnished in writing to the Company by or on behalf of the relevant Investor (seeking indemnity) expressly for use therein. |
7.4 |
In the event that the Company undertakes the QIPO under this Clause 7, the Sponsors undertake to provide such number of Equity Securities as may be required in addition to the Equity Securities held by the Investors to fulfil the mandatory minimum offer size requirement for achieving the QIPO and listing under applicable Laws. The Company shall obtain all consents and approvals from the Authority as may be necessary to complete the QIPO if the QIPO is to |
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be undertaken under this Clause 7. |
7.5 | If the Investors decide to offer up to 100% (one hundred per cent) of the Equity Securities held by them at the relevant time as part of the QIPO, subject to applicable Laws and the rules and regulations of the Relevant Market(s) on which the Equity Securities are listed pursuant to the QIPO, the Sponsors shall either not offer any Equity Securities for sale or offer for sale such further number of Equity Securities as may be required by applicable Laws to be offered to the public as a condition for obtaining listing on any Relevant Market. The Sponsors shall not withhold approval and shall do all acts and deeds as may be required to effectuate the QIPO and to allow the Investors to exercise their right to offer up to 100% (one hundred per cent) of the Equity Securities held by each of them. |
7.6 | In case the Equity Securities offered by the Investors for sale through the QIPO exceed the number of Equity Securities that in the opinion of the merchant bankers/investment bankers to the issue are appropriate considering the market appetite and conditions, then the Investors agree to offer their Equity Securities for sale through the QIPO in the following ratio: |
The number (and if this is not a whole number, such number rounded to the nearest whole number) obtained by multiplying the number of the Equity Securities of the Company on an Fully Diluted Basis that are to be offered as part of the QIPO by a fraction: (i) the numerator of which shall be the number of Equity Securities of the Company on a Fully Diluted Basis held by the Investor intending to offer its Equity Securities through the QIPO; and (ii) the denominator of which shall be the aggregate number of Equity Securities of the Company on a Fully Diluted Basis held by all the Investors.
7.7 | The Sponsors shall do all the acts and deeds required to effectuate the QIPO and to allow the Investors to exercise their right to offer their Equity Securities, including without limitation, preparing and signing the relevant offer documents, conducting road shows, entering into such documents, providing all necessary information and documents necessary for preparing the offer document, obtaining such regulatory or other approvals and doing such further acts or deeds as may be necessary or are customary in transactions of such nature, or do all acts necessary to facilitate the Investors right to offer their Equity Securities. |
7.8 | Subject to applicable Laws, the Investors shall be entitled to freely Transfer up to all of the Equity Securities held by them subsequent to the occurrence of the QIPO and consequent listing of the Equity Securities. |
7.9 | Subject to applicable Laws, the Investors shall not be considered as a promoter of the Company or the issue, and the Equity Securities held by the Investors shall not be subject to any statutory lock-in restrictions with respect to the QIPO. In the event that any Equity Securities are to be made subject to any lock-in in connection with any QIPO, then the Sponsors shall offer their Equity Securities towards such lock-in. |
7.10 | All costs and expenses relating to the QIPO including statutory filing and registration fees, and fees for advisors and managers to the QIPO, shall be borne by the Company. |
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8. | REINSTATEMENT OF RIGHTS |
8.1 | In the event that: |
(a) | The prospectus or the offer document is filed with the appropriate Authority or the Relevant Market, as applicable, in respect of any proposed QIPO or IPO (as applicable) and, in connection with such filing, such Authority or Relevant Market requires the alteration of the class of any of the Equity Securities held by the Investors and/or the rights attaching to any of the Equity Securities held by the Investors and/or the rights set out in this Agreement (such alterations being, collectively, the Conforming of Rights ); and |
(b) | Within 30 (thirty) days following the filing of the prospectus or offer document by the Company (the expiry of such thirty (30) day period, being referred to as the the Listing Date ), the QIPO or an IPO (as applicable) does not complete such that the entire issued, paid-up and subscribed share capital (other than Equity Shares that are agreed by the Investors to be subject to lock-in post QIPO/IPO) is admitted to trading on a Relevant Market by the expiry of the Listing Date, |
then the Investors shall be placed in the same position and shall have the same preferential and other rights, they had the benefit of, immediately prior to the Conforming of Rights, and the Company and the Sponsors shall undertake all necessary actions as may be required by the Investors to ensure that the Investors are placed in the same position, and possess the same preferential and other rights, they had the benefit of, immediately prior to the Conforming of Rights.
8.2 | Notwithstanding anything provided in this Agreement, the Company and the Sponsors undertake and covenant to the Investors that they shall, within 10 (ten) Business Days of the Listing Date (if the QIPO or an IPO, as the case may be, has not completed by that date) or the earlier date on which the QIPO or an IPO, as the case may be, is cancelled or discontinued, take all such actions and do all such things as may be requested by the Investors and/or otherwise required. The Sponsors and the Company undertake to enter into any contractual arrangements to restore the Investors respective rights to the rights they enjoyed or had the benefit of immediately prior to any Conforming of Rights and support all such decisions and actions, by exercising their respective voting and other rights, to ensure all the necessary, required or requested resolutions of the Board and the Shareholders of the Company, to effect the actions contemplated above, which steps shall include without limitation: |
(a) | Conversion of the Company into a private limited company; |
(b) | The alteration of the Articles to include all of the rights attaching to the Applicable Investor Securities immediately prior to the Conforming of Rights. |
8.3 | If the QIPO/IPO does not complete by 31 st December, 2015 ( IPO Failure Date ), each of IFC, DEG and Proparco shall have the unconditional right to require the Company by way of a written notice ( Swap Notice ) to buyback all or part of the CCDs and/or Proparco CCPS held by them and as a consideration for such buy back of CCDs and/or Proparco CCPS, transfer to IFC, DEG and/or Proparco CCPS (as the case may be) an equal number of compulsorily convertible debentures and/or compulsorily convertible preference shares of AZI that carry |
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similar rights and preference in AZI ( AZI Securities ) as are carried by CCDs and/or Proparco CCPS in the Company that are being bought back. It is clarified that no additional amounts or consideration (other than tendering their CCDs and/or Proparco CCPS in the buy back by the Company) shall be payable by IFC, DEG and/or Proparco for the purchase of AZI Securities as stated above. It is further clarified that the right under this Clause 8.3 can be exercised by each of IFC, DEG and Proparco individually. On the receipt of the Swap Notice, the Company shall provide a copy to all Investors and Sponsors at the earliest possible, and shall ensure that the process of buy back of CCDs and/or Proparco CCPS and the transfer of AZI Securities as required by this Clause 8.3 is completed within 30 (thirty) days of the receipt of the Swap Notice by the Company.
On the transfer of AZI Securities to IFC, DEG and/or Proparco (as the case may be), the Company, Sponsors and other Parties to this Agreement shall ensure that IFC, DEG and/or Proparco are made parties to the AZI Shareholders Agreement, which shall be amended to provide IFC, DEG and/or Proparco with similar rights and preference in AZI as were available to them as holders of AZI Securities pursuant to the Existing AZI SHA. All cost and expenses incurred to give effect to this Clause 8.3 shall be borne by the Company or AZI.
All Parties hereby unconditionally agree to execute such contractual arrangements and support all such decisions and actions, by exercising their respective voting and other rights, to ensure all the necessary, required or requested resolutions of the Board and the Shareholders of the Company, to effect the actions contemplated above.
9. | BUY-BACK OF EQUITY SECURITIES |
9.1 | At any time after the expiry of QIPO Due Date, if the Company has not successfully conducted the QIPO, each of the Investors shall have option at its discretion to require the Company to buy back all or part of the Equity Securities held by such Investor in accordance with this Clause 9 (the Buy Back Option ). In addition to the above, at any time before the expiry of QIPO Due Date, (i) Proparco shall have the right to exercise the Buy Back Option under this Clause 9 in the event of a breach of the terms of Proparcos policy covenants as specified under Schedule P of this Agreement; (ii) Each of GIF and IFC shall have the right to exercise the Buy Back Option under this Clause 9 in the event of a breach of the terms of IFC Policy Covenants as specified under Schedule K of this Agreement; and (iii) DEG shall have the right to exercise the Buy Back Option under this Clause 9 in the event the Company or any of its Subsidiaries engage in any of the activities as set out in Schedule O of this Agreement. |
Upon any of the Investors notifying the Company in writing (the Buy Back Notice ) of its decision to exercise the Buy Back Option in accordance with the preceding paragraph, the Company shall within 3 (three) Business Days of receipt of the Buy Back Notice inform about the exercise of Buy Back Option and provide a copy of the Buy Back Notice to all other Investors (the Buy Back Intimation ). It is clarified that on the delivery of Buy Back Notice to the Company by any of GIF, IFC, DEG or Proparco for a breach of the terms of Schedule P, Schedule K and Schedule O in the manner set out above, all Investors shall be entitled to exercise the Buy Back Option. The Company shall initiate the process of buy back of the Equity Securities after the completion of 30 (thirty) Business Days from the date of the Buy Back Intimation (the Buy Back Start Date ), which date in any event shall not be later than 33 (thirty three) Business Days from the receipt of the Buy Back Notice by the Company. The Company shall consider all the Buy Back Notices delivered by the Investors before the Buy
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Back Start Date for initiating the process of buy back of the Equity Securities.
The Company shall be obligated to buy back from such Investors who have exercised the Buy-Back Option the maximum number of Equity Securities as specified by such Investors in the Buy Back Notice that the Company is permitted to buy back in accordance with applicable Law within the Buy-Back Period (as defined below), and if not permitted by applicable Law to buy back in that period, the Company shall conduct the buyback as and when permitted by applicable Law (from time to time) to the maximum extent permissible till all the Equity Securities specified by the Investors in the Buy Back Notice have been bought back in accordance with this Clause 9.
The Buy-Back Period shall mean a period of 60 (sixty) days from the date of the Buy Back Start Date, and for buy back of residual Equity Securities after the first mentioned Buy-Back Period, within a period of 60 (sixty) days starting from the time the Company becomes eligible or entitled to buy-back the Equity Securities. It is clarified that, if the Company is not permitted to buy back within a period of 60 (sixty) days from the date of the Buy Back Start Date due to any reason, including the Company not having satisfied the financial tests as required by applicable Law for the buyback of shares, then the Company shall undertake such buy-back in the succeeding Buy-Back Periods as permitted by applicable Law, along with the buy-back pursuant to Buy Back Options exercised by any other Investor.
In is agreed that subject to compliance with the applicable Law, the buyback of the CCDs may be implemented by the Company by way of redemption of the CCDs for the amounts and preference as set out in this Clause 9, and all provisions of this Clause 9 shall apply mutatis mutandis to such redemption as are applicable to the buyback of Equity Securities.
9.2 | Notwithstanding anything contained in the Transaction Documents, if required by applicable Law, any Investor exercising its Buy-Back Option under this Agreement shall convert the Equity Securities held by it into Equity Shares of the Company in accordance with Schedule C to Schedule J and Schedule R , Schedule S, Schedule T and Schedule U (as the case may be) of this Agreement prior to the actual buy-back, and the Company shall take all such steps to ensure such conversion. For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by IFC, DEG and/or Proparco pursuant to the conversion of the CCDs and Proparco CCPS shall be treated at par with the remaining Equity Shares of the Company for the purposes of this Clause 9, save and except where the CCDs and Proparco CCPS are converted into Equity Shares of the Company on or immediately prior to and only in connection with IFC, DEG and/or Proparco exercising its Buy-Back Option under this Agreement, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the CCDs and Proparco CCPS will be entitled to priority in terms of payment in the like manner as the CCDs and Proparco CCPS, as set out in Clause 9.3. |
9.3 | The Buy-Back Option shall be exercised in accordance with, and subject to, applicable Laws. In the event that all the Equity Securities (including Equity Shares issued upon conversion of the Equity Securities) as specified by the Investors cannot be bought back by the Company due to operation of Law (including the Act), and if on the date of the Buy Back Notice, the number of Equity Securities that can be bought back by the Company is less than the number of Equity Securities that are required by the Investors to be bought back, the Company undertakes to effect a buy back in accordance with Clause 9.3.2. |
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9.3.1 | In the event that the buy-back is effected under this Clause 9.3, (a) the Parties agree that they shall honour the buy-back preferences under Clause 9.3.2 and to the extent necessary to honour the provisions of Clause 9.3.2, they shall not tender their Equity Securities for buy-back nor shall they raise any objection to the Company accepting the tender by the other Investors of the Equity Securities held by them under such Buy Back Option; and (b) the Sponsors undertake that they shall not tender their Equity Securities for buy-back nor shall they raise any objection to the Company accepting the tender by the Investors of the Equity Securities held by them under such Buy-Back Option. |
9.3.2 | Buy-Back Preferences |
(a) | Buy back of CCDs and Proparco CCPS |
The Company shall first buy back all the CCDs and Proparco CCPS for an amount equal to their respective Senior Liquidation Price plus any accrued and unpaid interest, within the Buy Back Period, in pro rata proportion to the amount due to them in this Clause 9.3.2(a).
(b) | Buy back of Series H CCPS |
After buying back all of CCDs and Proparco CCPS in accordance with Clause 9.3.2 (a) above, the Company will buy-back all Series H CCPS for an amount that provides the holders of the Series H CCPS an amount equal to Series H Liquidation Price plus any accrued and unpaid dividends thereon, within the Buy Back Period, in pro rata proportion to the amounts due to the holders of the Series H CCPS under this Clause 9.3.2(b).
(c) | Buy back of Series F CCPS |
After buying back all of CCDs, Proparco CCPS and Series H CCPS in accordance with Clause 9.3.2 (a) and Clause 9.3.2 (b) above respectively, the Company will buy back such number of Series F CCPS for an amount that provides the holders of the Series F CCPS an amount equal to 150% (one hundred and fifty percent) of the Series F Investment Amount, plus any accrued and unpaid dividends thereon, within the Buy Back Period, in pro rata proportion to the amounts due to the holders of the Series F CCPS under this Clause 9.3.2(c).
The number of Series F CCPS to be bought back under this Clause 9.3.2 (c) shall be such that after the buy-back in accordance with this Clause 9.3.2 (c), the holders of the Series F CCPS are left with such number of Series F CCPS as will be required by them to receive amounts pursuant to Clause 9.3.2 (f).
(d) | Buy back of Series B CCPS/ Series C CCPS/ Series D CCPS |
After buying back all of (i) CCDs and Proparco CCPS in accordance with Clause 9.3.2 (a) above; and (ii) Series H CCPS in accordance with Clause 9.3.2 (b) above; and (iii) Series F CCPS in accordance with Clause 9.3.2 (c) above,
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the Company will buy back all Series B CCPS, Series C CCPS and Series D CCPS for an amount that is equal to 200 % (two hundred per cent) of the Series B Investment Amount, Series C Investment Amount and Series D Investment Amount, as applicable, plus any accrued and unpaid dividends, within the Buy Back Period, in pro rata proportion to the amounts due to them in this Clause 9.3.2(d).
(e) | Buy back of Series A CCPS |
After buying back all the Equity Securities in accordance with Clause 9.3.2 (a), (b), (c) and (d) above, the Company will buy back all Series A CCPS for an amount equal to 140% (one hundred and forty per cent) of the Series A Investment Amount plus any accrued and unpaid dividends, within the Buy Back Period, in pro rata proportion to the amounts due to them in this Clause 9.3.2 (e).
(f) | Buy Back of remaining Shares |
After honouring the buy-back preferences under this Clauses 9.3.2(a), (b), (c), (d) and (e), the Company may buy back Equity Shares of the Company, in a manner such that the holders of the outstanding Series F CCPS are entitled participate in the buy-back pro rata along with the holders of other Equity Shares. Notwithstanding the foregoing, the holders of Series F CCPS shall be entitled to an amount not more than the Series F Participation pursuant to the buy back in this Clause 9.3.2(f). It is clarified that the number of Equity Shares that the outstanding Series F CCPS shall be converted into for the purpose of this Clause 9.3.2(f) shall be determined such that the holders of the outstanding Series F CCPS do not receive any amount in excess of Series F Participation. The Company shall not buy-back Equity Shares under this Clause 9.3.2(f) from any holder of Equity Shares unless such buy back provides an opportunity to the holders of Series F CCPS to receive their Series F Participation as set out above.
Upon exercise of the Buy-Back Option in accordance with Clause 9.3 above:
(i) | if all or some of the Series B CCPS or Series D CCPS are converted into Equity Shares of the Company (other than for receiving their respective entitlement in the manner provided in Clause 9.3.2) on or immediately prior to the exercise of the Buy-Back Option under Clause 9.3.2; and |
(ii) | if the holders of Series F CCPS have not converted their respective Series F CCPS into Equity Shares (or have converted their respective Series F CCPS into Equity Shares for receiving their respective entitlement in the manner provided in Clause 9.3.2) and have exercised their right to the Series F Participation, pursuant to exercise of which, amounts to be received by IFC (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares, other than for receiving their respective entitlement in the manner provided in Clause 9.3.2) from the proceeds available from the exercise |
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of the Buy-Back Option is less than the amounts IFC would have otherwise received (with respect to Series B CCPS and Series D CCPS held by it that have been converted into Equity Shares other than for receiving their share in the proceeds available from the buy-back of Equity Securities) if the holders of Series F CCPS had not exercised the right of Series F Participation (the difference of such amount hereinafter referred to as the Buy-Back Differential Amount ), |
then, the Sponsors shall through a suitable mechanism (as agreed upon with IFC) ensure that IFC receives the Buy-Back Differential Amount simultaneously with the amounts received by the holders of Series F CCPS pursuant to Series F Participation. |
9.4 | After all the payments have been made in accordance with Clause 9.3.2 (a), (b), (c), (d),(e) and (f) above, the Investors shall have no right whatsoever in respect to any proceeds remaining with the Company. However, nothing contained in the preceding sentence shall restrict the rights available to the Investors under the applicable Law, including a right to claim damages for breach of the Transaction Documents. |
9.5 | The Sponsors agree and undertake that they shall honour the buy-back obligations of the Company as set out in this Clause 9. |
9.6 | For the purposes of this Clause 9, the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. Nothing contained in this Clause 9.6 shall apply in relation to Series H CCPS, and the calculation of entitled return and payment thereof to the holders of Series H CCPS shall be in USD terms. |
9.7 | If the Company intends to request a buyback of the equity securities it holds in AZI to generate cash required to pay for the buyback of the Equity Securities held by the Investors under this Clause 9, then the Company shall cause AZI to initiate and complete the buyback of the equity securities of AZI held by the Company that carry similar rights and preference in AZI as are carried by the Equity Securities in the Company that are required to be bought back by the Company pursuant to this Clause 9. The buyback of the equity securities of AZI shall be done on a proportionate basis to the number of Equity Securities in the Company that are required to be bought back by the Company. The buyback of the equity securities of AZI shall be in accordance with the AZI Shareholders Agreement. |
9.8 | Without prejudice to the rights of the Investors to exercise the Buy Back Option, if the Company is not able to buyback the CCDs and/or Proparco CCPS from IFC, Proparco and/or DEG (if required by them) within 60 (sixty) days from the date of the Buy Back Start Date, then IFC, Proparco and/or DEG shall have the option to exercise their rights as set out in Clause 8.3 above with respect to the CCDs and/or Proparco CCPS which have not been bought back by the Company. |
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9A | BUY-BACK FROM IFC, DEG OR PROPARCO |
9A.1 | Buy Back at IFCs/ DEGs/ Proparcos Option |
(a) | Without prejudice to Clause 9, if upon conversion (where the conversion ratio for the CCDs is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I and Schedule R as applicable, and for Proparco CCPS as provided in paragraph 4.2 of Schedule J and Schedule T, as applicable), the CCDs and Proparco CCPS do not provide IFC, DEG and/or Proparco their respective Required Return, then IFC, DEG and/or Proparco may, within 15 (fifteen) Business Days from the date of the conversion of the CCDs and Proparco CCPS, by a written notice ( IFC/DEG/Proparco Buy-Back Notice ) to the Company, require the Company to buy back all the Equity Shares acquired by IFC, DEG and/or Proparco upon conversion of their respective CCDs and Proparco CCPS. For the purposes of the above conversion of the CCDs and Proparco CCPS, the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2(i)(b) of Schedule E, Schedule H Schedule I, Schedule J, Schedule R and Schedule T, as applicable. |
(b) | Upon receipt of the IFC/ DEG/ Proparco Buy Back Notice, the Company shall be obligated to buy back, in accordance with applicable Law, all Equity Shares acquired by IFC, DEG and/ or Proparco upon conversion of the CCDs and Proparco CCPS, within a period of 30 (thirty) Business Days from the date of the IFC/ DEG/ Proparco Buy Back Notice ( IFC/DEG/ Proparco Buy Back Option ). If the Company is not permitted to buy back all Equity Shares acquired by IFC, DEG and/or Proparco within a period of 30 (thirty) Business Days from the date of the IFC/DEG/Proparco Buy-Back Notice due to restrictions under applicable Law, the Company shall buy back the maximum number of Equity Shares held by IFC, DEG and/or Proparco in such manner as permitted by applicable Law till all the Equity Shares held by IFC, DEG and/or Proparco are bought back in accordance with this Clause 9A.1. |
(c) | The said Equity Shares shall be bought back by the Company for an amount equal to the applicable Senior Liquidation Price plus any accrued and unpaid interest. Provided that if the IFC/ DEG/ Proparco Buy Back Option is proposed to be exercised prior to the expiry of QIPO Due Date, then the Company shall require the consent of Helion and FC prior to completing the buyback. Provided however, consent shall not be required from Helion and FC where the buy-back is undertaken by the Company under Clause 9. |
9A.2 | Buy Back at Companys Option |
Without prejudice to Clause 9, if upon conversion (where the conversion ratio for the CCDs and Proparco CCPS is as provided in paragraph 4.2 of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, respectively), the CCDs and Proparco CCPS provides IFC, DEG and/ or Proparco (as the case may be) a return in excess of their respective Required Return, then the Company may, within 15 (fifteen) Business Days from the date of the conversion of the CCDs and Proparco CCPS, subject to the prior approval of Helion and FC, by a written notice (Company Buy
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Back Notice ) to IFC, DEG and/ or Proparco, have the right to buy back and IFC, DEG and/ or Proparco shall have the obligation to offer for buy back, such number of Equity Shares as is required to reduce IFCs or DEGs or Proparcos shareholding to such percentage as is adequate to give IFC, DEG and/ or Proparco their respective Required Return.
For the purposes of the above conversion the Parties shall rely on a valuation of the Company done in accordance with paragraph 4.2 (i)(b) of Schedule E, Schedule H, Schedule I, Schedule J, Schedule R and Schedule T, as applicable.
The said Equity Shares shall be bought back by the Company at the lowest price permissible under Law, within 30 Business Days from the date of the Company Buy Back Notice ( Company Buy Back Option ).
9A.3 | In the event that the buy-back is effected under Clause 9A.1 or Clause 9A.2, then the Sponsors and Helion and FC agree that, they shall not tender their Equity Securities for buy back nor shall they raise any objection to the Company accepting the tender by IFC, DEG and/or Proparco of the Equity Shares held by it under the IFC/ DEG/Proparco Buy Back Option or the Company Buy Back Option. |
9A.4 | The Sponsors agree and undertake that they shall honor the buy-back obligations of the Company as set out in this Clause 9A. |
9A.5 | It is hereby clarified that the rights of IFC, DEG and/or Proparco under Clause 9A.1 are without prejudice and are independent to the rights of IFC, DEG and/or Proparco under Clause 9 of the Agreement, and that the exercise by IFC, DEG and/or Proparco of rights under either Clause 9 or Clause 9A.1 shall not preclude IFC, DEG and/or Proparco from exercising rights under the other clause. |
9A.6 | For the purposes of this Clause 9A, the entitled amounts of the holders of Equity Securities shall be calculated in INR terms by taking investment amounts in Equity Securities in INR terms. However, at the time of payment of amounts to the holders of Equity Securities, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts. |
10. | BORROWINGS & FUNDING |
The Parties hereto expressly agree that in the event the Company proposes to borrow funds from any Person, including but not limited to banks and financial institutions, the Investors shall not be asked, or be required to give any warranties, letter of comfort and/ or guarantees, of any nature whatsoever for any loans or with regard to any aspect of the business or functioning of the Company.
11. | MANAGEMENT OF THE COMPANY |
11.1 | Directors |
The business and affairs of the Company shall be managed by the Board.
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11.2 | Board Composition |
11.2.1 (i) | IFC shall have the right to nominate 1 (one) Director to the Board ( IFC Nominee Director ); |
(ii) | GIF shall have the right to nominate 1 (one) Director to the Board of the Company ( GIF Director ); |
(iii) | Helion shall have the right to nominate 1 (one) Director on the Board of the Company (the Helion Director ); |
(iv) | FC shall have the right to nominate 1 (one) Director on the Board of the Company (the FC Director ); |
(v) | the Sponsors shall have the right to nominate 2 (two) Directors to the Board ( Sponsor Directors ), provided such Sponsor Directors shall be Employees or Shareholders or consultants of the Company or AZI; and |
(vi) | shareholders who are holding more than 50% (fifty percent) of the share capital of the Company on a Fully Diluted Basis shall have the right to nominate at least 1 (one) Director on the Board as an independent director ( Independent Director ) and two other Directors who are ordinarily resident in Mauritius. Mr. Robert Kelly and Ms. Diane Farell shall be the Independent Directors initially. |
11.2.2 | Proparco shall have the right to nominate 1 (one) Director to the Board ( Proparco Director ) as long as the IFC Nominee Director is not nominated to the Board by IFC, and on the appointment of the IFC Nominee Director on the Board, the Proparco Director (if nominated to the Board) shall automatically vacate the office of the Director. |
If at any time after his appointment, the IFC Nominee Director is no longer serving on the Board due to any reason, and such vacancy has not been filled in accordance with Clause 11.2.1 within a period of 2 (two) months, then Proparco shall have the right to nominate the Proparco Director on the Board till the time the IFC Nominee Director is not nominated on the Board by IFC.
It is clarified that vacation of the office of the Director by the Proparco Director as required under the preceding paragraph shall not affect or waive Proparcos right to nominate a director on the Board if it again becomes eligible to nominate a Director in accordance with this Clause 11.2.2.
Nothing contained in this Clause 11.2.2 shall affect IFCs right to nominate a director on the Board at its discretion in accordance with Clause 11.2.1.
11.2.3 | Each of the Nominating Investors shall have a right to nominate a Director on the Board in accordance with this Clause 11.2 as long as such Nominating Investor holds at least 2% (two per cent) of the total issued and paid up share capital of the Company on a |
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Fully Diluted Basis. |
11.2.4 | If the IFC Nominee Director is not an employee of IFC, then the Company shall pay sitting fees and reimburse travel and other expenses of such Director for attending the meetings of the Board (including any sub-committee) thereof subject to a cap of US$10,000 (Dollars Ten Thousand) per year. |
11.2.5 | The Company shall reimburse the reasonable travel and other expenses incurred for attending the meetings of the Board (including any sub-committees) by the GIF Director. |
11.3 | Removal of a Director |
The Party nominating a Director pursuant to Clause 11.2 shall have a right to require the removal of the Director nominated by such Party by giving a written notice to the Company. On the receipt of such notice by the Company, the Company shall convene a shareholders meeting to resolve on the removal on the Director, and the Shareholders hereby agree to vote and pass appropriate resolution to give effect to the removal of the Director as requested by the Party nominating such Director. The Parties agree that with respect to the Investor Directors and Sponsor Directors, in pursuance of Clause 11.2, the power to nominate and to propose a removal of a Director lies solely with the Party so entitled to nominate that Director. The Party nominating a Director shall from time to time, by like notice, have the right to appoint any other person to be a Director in the place of the Director so removed or in the place of any Director vacating office as a result of being removed by the Shareholders.
11.4 | No Qualification Shares |
A Director does not need to hold any qualification shares.
11.5 | Term of Directors |
The Directors in Clause 11.2.1 and Clause 11.2.2 shall hold office at the pleasure of the Nominating Investors and may be substituted at any time by the Nominating Investors by notice to the Company. The Directors, as then constituting the Board, and/or the Shareholders shall pass required resolutions in order to appoint or remove a person as a Director as advised by the respective Nominating Investor by notice to the Company.
11.6 | Casual Vacancies |
If any Director resigns, vacates or is removed from office before his term expires, the resulting casual vacancy may be filled by a nominee of the Party who originally nominated the Director vacating office, but any Person so nominated, shall retain his office only so long as the vacating Director would have retained the same, if no vacancy had occurred. The Parties agree that in the case of any casual vacancy in the office of the Independent Director or the Directors that are resident of Mauritius, the same shall be filled in accordance with Clause 11.2.1(vi).
11.7 | Proceedings of the Board |
11.7.1 | Number of Board meetings and Venue |
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The Board shall meet at least 4 (four) times in every calendar year and at least once in every calendar quarter. Meetings of the Board shall ordinarily be held in Mauritius. A Board meeting may also be held outside Mauritius at such other places as may be agreed by a majority of the Directors, from time to time. A Board meeting may also be held by teleconference or video conferencing and/ or the presence of a Director at a meeting may be recorded if he is present over telephone or video conferencing, and shall be counted for the purpose of quorum.
11.7.2 | Convening meetings of the Board |
Any Director may, and the company secretary, shall on the requisition of a Director, summon a meeting of the Board, in accordance with the notice and other requirements set out in this Clause 11.7.
11.7.3 | Notice for Board Meetings |
At least 15 (fifteen) Business Days prior a written notice shall be given to each of the Directors of any meeting of the Board. A meeting of the Board may be held at shorter notice with the written consent (which may be signified by letter, facsimile or e-mail with receipt acknowledged) of all Directors, or where all Directors attend the meeting without protest.
11.7.4 | Contents of Notice |
Every notice convening a meeting of the Board shall set forth in full and sufficient detail the business to be transacted thereat, and no item or business shall be transacted at such meeting unless the same has been stated in full and in sufficient detail in the notice convening the meeting, except as otherwise consented to by all the Directors, or their alternates, present at the meeting. The draft resolutions and other documents for all matters to be considered at the Board meeting must be furnished to all the Directors at least 7 (seven) Business Days prior to the date of the proposed Board meeting, except where such meeting is called on shorter notice. The secretary of the Company shall prepare the notice for the meetings. If the secretary is unavailable, unwilling or unable to do so, the Director that summoned the meeting shall prepare the notice.
11.7.5 | Quorum for the Board Meetings |
(i) | The quorum for a Board meeting shall require the presence of the IFC Nominee Director (if nominated by IFC), the Proparco Director (if nominated in accordance with Clause 11.2.2), the GIF Director, 1 (one) Sponsor Director, 1 (one) from among the Helion Director and FC Director and 1 (one) Director who is ordinarily resident in Mauritius. A meeting of the Board shall not be held or continued without meeting the requirement of this Clause 11.7.5, unless such Director has expressly waived the requirement for his presence either in writing or by facsimile transmission and in that case that Director shall not be required for quorum. |
Notwithstanding anything contained in this Clause 11.7.5 (i) above, in the
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event any of the Director as required to form quorum is unable to attend the scheduled Board meeting, he shall provide a written request to the Company, at least 5 (five) days prior to the date of the proposed Board meeting, to postpone the Board meeting (the Postponement Notice ), in which case such Board Meeting shall be postponed to such date which shall not be later than 7 (seven) days from the date of the scheduled Board meeting. In the event such a Director fails to provide a valid Postponement Notice, the Board meeting shall convene as scheduled without the Director who has failed to give the Postponement Notice and the Directors present at such meeting shall constitute the quorum. In the event a Director provides the Postponement Notice and, thereafter is not present or has not nominated an alternate on his behalf at the rescheduled Board Meeting, then the Board can proceed with such Board meeting and its agenda without the Director who has served the Postponement Notice and is absent from such rescheduled Board meeting and the Directors present at the meeting shall constitute the quorum. |
(ii) | Notwithstanding anything contained in Clause 11.7.5 (i), the quorum for any Board meeting (including a rescheduled Board meeting) in which the agenda includes the items in Schedule L and Schedule M shall require the presence of the Helion Director, FC Director, Proparco Director (if appointed), IFC Nominee Director (if appointed) and GIF Director. |
11.7.6 | Committees of the Board |
A committee of Directors or other Persons, to whom any powers of the Board are delegated, can be appointed only by the Board. The Nominating Investors shall have the right to have their nominees as members of any such committee, the number of such nominees being subject to Board approval. The provisions pertaining to the Board in this Agreement shall also pertain to every committee of the Board.
11.7.7 | Circular Resolutions |
The Board may act by written resolution, or in any other legally permissible manner, on any matter, except matters which by Law may only be acted upon at a meeting. Subject to any restrictions imposed by Law and the provisions of Clause 11.8 of this Agreement, no written resolution shall be deemed to have been duly adopted by the Board, unless such written resolution has been approved by all Directors.
11.7.8 | Chairman |
The Chairman of the Board shall be selected by the members of the Board at every Board meeting. The Chairman shall not have a casting vote.
11.7.9 | Alternate Directors |
The Board shall, if requested by the original Director or the Party that nominated the original Director, appoint an alternate director to act as a Director during the absence of any Director from Mauritius. The original Director in whose place such alternate director is to be appointed, or failing him the Party that appointed the original Director,
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shall recommend the alternate Director to the Board. The alternate Director shall, ipso facto vacate office as and when the original Director returns to Mauritius. The alternate Director shall have such powers and rights as are available to the original Director in whose place such alternate Director is appointed. |
11.8 | Restrictions on the Powers of the Board and the Shareholders |
11.8.1 | Notwithstanding anything to the contrary contained in this Agreement, but subject to the terms of Clause 11.8.4 of this Agreement, the decisions on items mentioned in Schedule L shall not be taken and/or implemented by the Company and its Subsidiaries at a meeting of their respective board of directors or at a meeting of their respective shareholders unless the prior written consent in favour of such decision has been obtained from all the Investors. |
11.8.2 | Notwithstanding anything to the contrary contained in this Agreement but subject to the terms of 11.8.4 of this Agreement, the decisions on items mentioned in Schedule M , shall not be taken and/or implemented by the Company and its Subsidiaries, at a meeting of their respective board of directors or at a meeting of their respective shareholders, unless the prior written consent in favour of such decision has been obtained from the Majority Investors. For the purpose of this Clause, the term Majority Investors shall mean the Investors who by virtue of their shareholding collectively hold more than 50% (fifty per cent) of the aggregate shareholding of the Investors in the Company on an As If Converted Basis. Any of the Investors will only be included in the definition of Majority Investor only till such time till they hold 5% (five per cent) of the shareholding of the Company on an As If Converted Basis. |
11.8.3 | Upon the Transfer of the CCDs and/or Proparco CCPS from IFC, DEG and/or Proparco (as the case may be) to any Person, the decisions on items mentioned in Schedule M , shall not be taken and/or implemented by the Company and its Subsidiaries, at a meeting of their board of directors or at a meeting of their Shareholders, unless the prior written consent in favour of such decision has been obtained from the Super-Majority Investors. For the purpose of this Clause, the term Super-Majority Investors shall mean the Investors who by virtue of their shareholding (excluding any of the CCDs that are continued to be held by IFC and/or DEG and the Proparco CCPS that are continued to be held by Proparco) collectively hold more than 85% (eighty five per cent) of the aggregate shareholding of the Investors in the Company on an As If Converted Basis. Any of the Investors will only be included in the definition of Super Majority Investor only till such time till they hold 5% (five per cent) of the shareholding of the Company on an As If Converted Basis. For the purpose of this Clause 11.8.3, the Investors shall include the transferees of the Equity Securities held by the Investors. It is clarified that nothing contained in this Clause 11.8.3 shall affect rights of the Investors under Clause 11.8.2. |
11.8.4 | Upon the Transfer of any Equity Securities of the Company to a Competitor, the following items of Schedule L shall be deleted from Schedule L and moved to Schedule M and the provisions of Clause 11.8.2 and Clause 11.8.3 shall then also apply to the following items: |
(i) | Any sale or disposal of Assets of value more than USD 5,000,000 (United |
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States Dollar Five Million) (other than pursuant to charge(s) on Assets created for securing borrowing(s) approved by Majority Investors under paragraph 9 of Schedule M); |
(ii) | Giving of any guarantee or comfort letter by the Company or any Subsidiary to any Person that is not in relation to securing project finance, working capital limits or non-fund based facilities availed for solar power projects of the Company or any Subsidiary; |
(iii) | Entry into, amendment or termination of any agreement or commitment which imposes or is likely to impose obligations on the Company to make payments or otherwise incur liabilities exceeding the budget approved by the Board, except automatic authorization to the CEO in accordance with point 1 of Schedule M; and |
(iv) | Incurring any single item of capital expenditure (including acquiring a business or asset) greater than INR 10,000,000 (Indian Rupees Ten Million). |
11.9 | The Parties agree that the Company is entitled to set up (direct or indirect) wholly owned subsidiaries to execute the power projects granted to the Company, subject to Clause 11.8. The Company and the Sponsors shall undertake to constitute the same structure of the board of directors as set out in Clause 11.2 in all the Subsidiaries of the Company. |
11.10 | Liability of Investor Directors |
The Sponsors and the Company expressly agree and undertake that each of the GIF Director, Helion Director, FC Director, Proparco Director and the IFC Nominee Directors, if appointed, shall not be in charge of, or responsible for the day to day management of the Company and shall not be liable for any default or failure of the Company in complying with the provisions of any applicable Laws, including but not limited to, defaults under the applicable Laws.
11.11 | Indemnification |
The Company agrees to indemnify all Directors to the maximum extent permitted by applicable Law, and shall enter into appropriate indemnification agreements with each Director reiterating the same. The Articles shall provide the broadest indemnification of directors permitted by Law. In addition to the above, the Company and the Sponsors agree to jointly and severally indemnify and keep each of IFC, DEG, GIF, FC, Helion and Proparco and their Affiliates, together with their respective officers, directors, employees, Affiliates, and agents (the Indemnified Parties ), indemnified, on demand, against each loss, liability and cost (including legal and other professional costs) suffered or incurred by the Indemnified Parties arising out of or in connection with the breach by the Sponsors and or the Company of the terms, conditions, representations, undertakings, warranties or other covenants or other provisions entered into or given by the Sponsors and/or the Company as contained in the Transaction Documents or in respect of, or in any manner related to, any act or omission of the Sponsors and/or the Company.
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11.12 | Board of Directors of AZI |
The Parties acknowledge that the Company has a right to nominate 4 (four) directors on the board of directors of AZI. The Investors shall have the right to nominate these directors on the board of directors of AZI in such manner as they have under this Agreement with respect to the appointment of Directors on the Board of the Company. On receipt of a written notice from any Investor to appoint its nominee as a director on the board of directors of AZI, the Company shall take all required steps to ensure that the nominee of the Investor is appointed as a director on the board of directors of AZI. The Investor nominating a director on the board of directors of AZI shall also have the right to require the removal of the director nominated by such Investor by giving a written notice to the Company.
12. | SHAREHOLDERS MEETINGS |
12.1 | Shareholders Meetings |
An annual meeting of the Shareholders of the Company shall be held in accordance with the Act. Subject to the foregoing, the Board may convene a special meeting of the Shareholders whenever it deems appropriate.
12.2 | Notice for Shareholders Meetings |
At least 21 (twenty-one) days prior written notice of every meeting of the Shareholders shall be given to all Shareholders whose names appear on the Register of Members of the Company. A meeting of the Shareholders may be called by giving shorter notice with the written consent of all Shareholders, or where all Shareholders attend the meeting without protest.
12.3 | Contents of Notice |
The notice to Shareholders shall specify the place, date and time of the meeting. Every notice convening a meeting of the Shareholders shall set forth in full and sufficient detail the business to be transacted thereat, and no business shall be transacted at such meeting unless the same has been stated in the notice convening the meeting. The draft resolutions to be considered at the shareholders meetings must be furnished to all the Shareholders along with the notice of the proposed meeting of the Shareholders.
12.4 | Chairman for Shareholders Meeting |
The Chairman of the immediately preceding Board meeting shall act as the Chairman of the meeting of the Shareholders, except (a) in the event such individual is not present for the meeting of the Shareholders, in which case the Shareholders may elect any other person as the Chairman, and (b) in the case of a meeting requisitioned by any Shareholders, in which case the Shareholders may elect any other person as the Chairman. The Chairman shall have no second or casting vote.
12.5 | Proxies |
Any Shareholder of the Company may appoint another Person as his proxy (and in case of a corporate Shareholder, an authorized representative) to attend a meeting and vote thereat on
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such Shareholders behalf, whether on poll or show of hands, provided that the power given to such proxy must be in writing.
12.6 | Quorum for Shareholders Meetings |
The presence of the authorised representative of each of the Investors shall be required to constitute quorum for a meeting of the Shareholders.
12.7 | Adjournment of Shareholders Meetings for lack of Quorum |
If within half an hour from the time appointed for holding a general meeting of the Company, a quorum is not present, the meeting shall stand adjourned for a period determined by the Board, but not less than 7 (seven) days. Notice of the adjourned meeting shall be provided to all the Shareholders along with the draft resolutions to be considered at the meetings at least 5 (five) days prior to the date of the adjourned meeting. The quorum requirements set out at Clause 12.6 above shall apply at such adjourned meeting as well.
13. | EXERCISE OF VOTING & OTHER RIGHTS BY PARTIES |
13.1 | The Investors and the Sponsors jointly undertake to ensure that they, their representatives and proxies representing them at the meetings of the Shareholders of the Company shall at all times exercise their votes and through their respective appointed/ nominated Directors (or alternate directors) at Board meetings and otherwise, act in such manner so as to comply with, and to fully and effectually implement the spirit, intent and specific provisions of this Agreement. |
13.2 | If a resolution contrary to the terms of this Agreement is proposed at any meeting of Shareholders or at any meeting of the Board or any committee thereof, the Investors and the Sponsors, their representatives (including proxies) and their respective appointed/ nominated Directors (or alternate directors), shall vote against the same; provided, however, that if for any reason such a resolution is passed, the Shareholders shall, as necessary jointly convene or cause to be convened a meeting of the Board or any committee thereof or an extraordinary general meeting of the Shareholders for the purpose of implementing the terms and conditions of this Agreement and to give effect thereto, and to supersede such resolution. |
13.3 | The Investors and the Sponsors jointly agree and undertake to ensure that they shall abide by the terms of the CCDs, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS, Proparco CCPS and the Series A CCPS, as set out in this Agreement, and that they, their representatives and proxies representing them at the meetings of the Shareholders of the Company shall at all times exercise their votes and through their respective appointed/nominated Directors (or alternate directors) at Board meetings and otherwise, act in such manner so as to comply with, and to fully and effectually implement the terms of the CCDs, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS, Series H CCPS, Proparco CCPS and the Series A CCPS, as set out in this Agreement. |
13.4 |
From and after the issuance of the Equity Securities in accordance with the terms of the Transaction Documents, the Company shall exercise its voting rights in its Subsidiaries in such a manner so as to ensure that (A) the provisions with respect to consent rights of Investors under this Agreement, including Clause 11.8, are given effect to; and (B) each Shareholder of the Company is able to vote on every resolution relating to the Subsidiary, to the extent of the |
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voting rights available to the Shareholder in the Company. |
13.5 | It is agreed that nothing contained in this Clause 13 shall affect the fiduciary duties and other obligations of the Directors as prescribed by the Act. |
14. | INFORMATION RIGHTS |
14.1 | For so long as each of the Investors holds any Equity Securities in the Company, the Company shall furnish to the Investors and/ or their assignees/ nominees the following: |
(a) | Monthly, quarterly and annual financial statements of the Company prepared in accordance with United States GAAP (General Accepted Accounting Principles) and its Subsidiaries prepared in accordance with Indian GAAP (including an income statement, a statement of cash flow, a balance sheet, detailed break-down of working capital, including an aging analysis and comparisons to budget) within 15 (fifteen) days of the end of each month, within 30 (thirty) days of the relevant quarter, annual unaudited Accounts within 45 (forty five) days of the end of the Financial Year and annual audited financials within 90 (ninety) days of the end of the Financial Year. The formats of all such financial statements shall be mutually agreed amongst the Company, the Sponsors and the Investors. |
(b) | A certificate signed by the chief financial officer of AZI or a similar ranking employee of AZI on a quarterly basis certifying (i) that AZI has fulfilled and complied with the terms of all guarantees, comfort letters or any other security provided by AZI with respect to any loans or other borrowings availed by its Subsidiaries, (ii) that no breach or other event of default has occurred or is reasonably likely to occur in relation to the loans or other borrowings availed by the Subsidiaries from any bank or financial institution, and (iii) in case a breach or any other event of default has occurred or is reasonably likely to occur in relation to the loans or other borrowings availed by the Subsidiaries, the actions or steps taken by AZI and/or its Subsidiaries to remedy or prevent such breach or any other event of default, in each case in the form as required by the Investors. A certificate signed by the chief financial officer of the Company or a similar ranking employee of the Company covering all of the above mentioned particulars on an annual basis. The above mentioned certificates shall be provided along with the quarterly or annual financial statements of the Company respectively within the time period mentioned in sub-clause (a) above. |
(c) | Annual Business Plan and Budget of the Company and its Subsidiaries (including quarterly budget containing an income statement, a statement of cash flow, a balance sheet and detailed breakdown of working capital and head count), no later than 45 (forty five) days after the beginning of the Financial Year. |
(d) | Audited Accounts of the Company (both consolidated and unconsolidated) in accordance with US GAAP, and of AZI (both consolidated and unconsolidated) and its Subsidiaries in accordance with Indian GAAP (Generally Accepted Accounting Principles) within 120 (one hundred and twenty) days of the end of the Financial Year. |
(e) | Brief quarterly reports including a narrative describing the progress to-date of the Company and its Subsidiaries within 30 (thirty) days of the end of each quarter. |
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(f) | all information as required by Schedule W with respect to the Company and its Subsidiaries on an annual basis within 90 (ninety) days from the end of each Financial Year; |
(g) | Any material information including appointment/ resignation of any key employee of the Company and its Subsidiaries other than the Key Managerial Personnel within a period of 7 (seven) days from the Company possessing knowledge of the same. |
(h) | All other information reasonably requested by the Investors or the Sponsors, as the case may be, or their nominees on the Board from time to time. |
(i) | All other information reasonably requested by Helion and FC or the Investor Directors appointed by Helion and FC, together, from time to time, which is required by either Helion or FC to meet its regulatory and tax obligations in any jurisdiction, including without limitation, information required to meet the rules and regulations of United States controlled foreign corporation and passive foreign investment company as set out in Schedule B and United States tax compliance requirements. |
(j) | A copy of the conversion notice requiring the conversion of the Share Equivalents and a notice for buy back under Clause 9 and Clause 9A, received by the Company from any Investor or served by the Company to any Investor, within a period of 3 (three) days of the receipt of such notice by the Company or of the date of such notice served by the Company, as applicable. |
(k) | Any notice or other communication received by the Company pursuant to the AZI Shareholders Agreement, immediately on its receipt by the Company. |
15. | ANNUAL BUSINESS PLAN AND BUDGET |
15.1 | Preparation of Annual Business Plan and Budget |
The Shareholders acknowledge that the business of the Company and its Subsidiaries will be conducted in accordance with the Annual Business Plan and Budget. Each Annual Business Plan and Budget shall be prepared under the direction and supervision of the CEO of the Company, if any, and shall be updated at least 60 (sixty) days prior to the beginning of each Financial Year of the Company. At least 30 (thirty) days prior to the beginning of each Financial Year of the Company, the Annual Business Plan and Budget shall be finalised and the CEO of the Company shall present the same to the Board.
15.2 | Approval of Annual Business Plan and Budget |
The Annual Business Plan and Budget shall be approved by the Board. The Annual Business Plan and Budget may be amended only by a resolution of the Board passed in accordance with Clause 11.8.
15.3 | Variances to Annual Business Plan and Budget |
Any variances to the Annual Business Plan and Budget shall be subject to the provisions of
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Clause 11.8 above. Any cost, not previously included in the Annual Business Plan and Budget for a Financial Year, which has been approved by the Board in accordance with Clause 11.8 shall be deemed to be included in the Annual Business Plan and Budget for that Financial Year.
16. | FINANCIAL ACCOUNTING AND AUDITS |
16.1 | Financial and accounting records |
The Company shall maintain true and accurate financial and accounting records of all operations in accordance with US GAAP, and in accordance with all relevant statutory and accounting standards and the policies from time to time adopted by the Board. The financial statements and Accounts of the Company shall be prepared in English and shall be audited on an annual basis.
16.2 | Statutory Auditors |
The Board shall recommend, and the Company in a meeting of the Shareholders shall appoint the statutory auditors for the Company from amongst the Big Four Accounting Firms. The Company shall cause AZI to appoint its statutory auditors from amongst the Big Four Accounting Firms that is recommended by the Board.
16.3 | Audit Committee and Compensation Committee |
The Board will establish and continue to have an audit committee (hereinafter referred to as the Audit Committee ) and a compensation committee, which will periodically review the salaries or other remuneration of all Key Managerial Persons including the CEO (the Compensation Committee). The Investors shall at all times be entitled to appoint one nominee each on the Audit Committee and the Compensation Committee.
17. | OTHER COVENANTS |
17.1 | Dividend up |
Subject to applicable Law, the Company and the Sponsors covenant that they will take all steps to ensure that each of the Subsidiaries of the Company pays all of its profits as dividend to the Company on an annual basis.
17.2 | Dividend policy |
Subject to applicable Law, the Company and the Sponsors covenant that the dividend policy agreed to between the Company, Shareholders and all Subsidiaries and their lenders shall be satisfactory to IFC and DEG and shall be such that the Company is able to pay (i) 10% interest on IFC CCDs, and (ii) 5% interest on DEG CCDs and the IFC III CCDs on a quarterly basis.
17.3 | IFC Policy Covenants |
So long as IFC and/or GIF holds any Equity Securities in the Company, the Company shall comply and the Sponsors shall ensure that the Company and its Subsidiaries comply with IFCs standard policies on environment, social, anti-corruption, anti-money laundering and insurance
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issues, as provided in Schedule K. The Company shall deliver to each of IFC and GIF, within 90 (ninety) days after the end of each Financial Year, an annual social and environmental performance report confirming compliance with the social and environmental action plan; and notify IFC and GIF, within 3 (three) days after the occurrence, of any social, labour, health and safety, security or environmental incident, accident or circumstance reasonably expected to have a material adverse social or environmental impact. In addition, GIF, IFC and the IFC compliance advisor ombudsman shall also have inspection and access rights.
17.4 | Insurance |
The Company shall (a) insure and keep insured on terms and conditions acceptable to IFC, with a reputable insurer or insurers all of the Companys and its Subsidiaries Assets and business which can be insured, against insurable losses, on a reinstatement basis utilizing current full replacement values, including insurance covers listed in Schedule V and any other insurance required by Law. The policies shall be in the English language; and the Company shall and shall ensure that its Subsidiaries shall (b) punctually pay any premium, commission and any other amount necessary for effecting and maintaining in force each insurance policy; and (c) maintain business interruption policy, third party liability policy and insurance policy for the head office, for an insurable amount satisfactory to IFC and DEG. In particular, the Company shall obtain (i) a directors and officers liability insurance policy for the Director nominated by Helion, FC, IFC, GIF and Proparco within 10 (ten) Business Days of the appointment of such Director on the Board, and (ii) an advanced loss of profit policy within 30 (thirty) days of such a request by IFC and/or DEG, on such terms that are reasonably satisfactory to IFC/DEG and the Company, and all costs in relation to these insurance policies shall be borne by the Company.
17.5 | Other Covenants |
17.5.1 | The Company covenants to ensure the development, implementation and continuing operation of the S&E Management System (as defined under the IFC Subscription Agreement). |
17.5.2 | Through its Employees, agents, contractors and subcontractors, the Company covenants to, ensure that the design, construction, operation, maintenance and monitoring of all its sites, plants, equipment and facilities are undertaken in compliance with: (i) the Performance Standards (as defined under the IFC Subscription Agreement); and (ii) the S&EA (as defined under the IFC Subscription Agreement). |
17.5.3 | The Company shall not and shall ensure that each of its Subsidiaries shall not enter into a business relationship with any person which is the target of economic sanctions administered by the OFAC or provide any financing or services to, or in connection with, any activity in any sector under Embargo by the United Nations. |
17.6 | Proparcos Policy Covenants |
So long as Proparco holds any Equity Securities in the Company, the Company, Sponsors and the Investors shall comply and the Sponsors shall ensure that the Company complies with Proparcos standard policies on environment, social, anti-corruption, anti-money laundering and insurance issues, as provided in Schedule P.
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18. | NON-COMPETE AND NON-SOLICITATION |
18.1 | The Sponsors hereby undertake that they shall not, and shall ensure that none of their Subsidiaries or Affiliates shall, singly or jointly, directly or indirectly, for their own account or as agent, employee, officer, director, consultant, or shareholder or equity owner of any other Person, engage or attempt to engage or assist any other Person to engage in the Business. The Sponsors further undertake that from the date of this Agreement, they shall give up, part with and/or cease and desist from carrying on in India any activity or business which is same as that of the Business. They undertake that any venture or investment, whether directly or indirectly, in the Business shall only be undertaken, carried on, implemented, or held through the Company or its Subsidiaries, unless each of the Investors give prior written consent to the Sponsors to do otherwise. |
18.2 | The Sponsors shall also not divulge or disclose to any Person any information (other than information available to the public or disclosed or divulged pursuant to an order of a court of competent jurisdiction) relating to the Business, including but not limited to the identity of clients, finance, contractual arrangements, business or methods. |
18.3 | The Sponsors covenant and agree that during the subsistence of this Agreement, they will not, directly or indirectly: |
(a) | attempt in any manner to solicit from any client/ customer, except on behalf of the Company, business of the type carried on by the Company or AZI, or to persuade any Person which is a client/ customer of the Company or AZI to cease doing business or to reduce the amount of business which any such client/ customer has customarily done or might propose doing with the Company whether or not the relationship between the Company and such client/ customer was originally established in whole or in part through his or its efforts; or |
(b) | employ or attempt to employ or assist anyone else to employ any Person as an employee or a consultant (including the Key Managerial Personnel and the CEO) who is in the employment of the Company or AZI, or was in the employment of the Company or AZI at any time during the preceding 12 (twelve) months; or |
(c) | otherwise interfere in any manner with the contractual, employment or other relationship of any Person (including the Key Managerial Personnel and the CEO) who is in the employment of the Company or AZI, or was in the employment of the Company or AZI at any time during the preceding 12 (twelve) months. |
18.4 | The Sponsors acknowledge and agree that the above restrictions are considered reasonable for the legitimate protection of the business and the goodwill of the Investors and the Company, but in the event that such restrictions shall be found to be void, but would be valid if some part thereof was deleted or the scope, period or area of application were reduced, the above restriction shall apply with the deletion of such words or such reduction of scope, period or area of application as may be required to make the restrictions contained in this Clause valid and effective. Notwithstanding the limitation of this provision by any Law for the time being in force, the Sponsors undertake to, at all times, observe and be bound by the spirit of this Clause 18. |
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18.5 | Provided however, that on the revocation, removal or diminution of the Law or provisions, as the case may be, by virtue of which the restrictions contained in this Clause were limited as provided hereinabove, the original restrictions would stand renewed and be effective to their original extent, as if they had not been limited by the Law or provisions revoked. |
18.6 | The Sponsors acknowledge and agree that the covenants and obligations with respect to non-compete and non-solicitation as set forth above relate to special, unique and extraordinary matters, and that a violation of any of the terms of such covenants and obligations will cause the Investors and the Company irreparable injury. Therefore, the Sponsors agree that the Investors and/ or the Company shall be entitled to an interim injunction, restraining order or such other equitable relief as a court of competent jurisdiction may deem necessary or appropriate to restrain the Sponsors from committing any violation of the covenants and obligations contained in this Clause 18. These injunctive remedies are cumulative and are in addition to any other rights and remedies that the Investors and/or the Company may have at Law or in equity. |
19. | RIGHT OF INSPECTION |
Each of the Investors shall, at all times, by giving a notice of at least 3 (three) Business Days, be entitled to carry out inspection of site, stores, accounts, documents, records, premises, and equipment and all other property of the Company and its Subsidiaries through their authorized representatives and/ or agents at their own cost and the Company and its Subsidiaries shall provide such information, data, documents, evidence as may be required for the purpose of and in the course of such inspection in connection therewith. The Investors shall be entitled, at their own cost and expense, to consult with the directors, statutory auditors and advisors of the Company regarding the business, operations and financial affairs of the Company or its Subsidiaries.
20. | INTELLECTUAL PROPERTY RIGHTS |
20.1 | All the IP Rights arising out of the performance by the Company or its Subsidiaries of its respective business shall be owned by the Company or its Subsidiaries as the case may be. Parties will assist the Company in securing its IP Rights by filing for appropriate protection under applicable Laws in the name of the Company. No Party to this Agreement will act in any manner derogatory to the proprietary rights of the Company or its Subsidiaries over their respective IP Rights. |
20.2 | The Company shall undertake that all IP Rights relating to the products of the Company, prior to or after execution of this Agreement, or IP Rights arising from development of solutions, projects executed, databases, copyrights, trademarks, brand name, and other IP Rights are registered exclusively in the name of the Company. |
20.3 | The Sponsors hereby transfer and shall be deemed to have assigned all rights, title and interest in all the intellectual property arising or created for the Company or its Subsidiaries subsequent to the execution of this Agreement and in relation to products of the Company or its Subsidiaries, to the Company or its Subsidiaries, including any copyright, trademark, trade secret, patent or other proprietary rights under the Laws of any jurisdiction. The Sponsors shall assist and co-operate with the Company and its Subsidiaries, and execute all appropriate documents, to perfect the Companys and its Subsidiaries respective right in this regard. From |
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the date of execution of this Agreement, the Sponsors and the Investors shall not have any right, interest, title or claim over any intellectual property developed or created for the purposes of the Company or its Subsidiaries in the course of their association with the Company including in relation to products of the Company or its Subsidiaries. |
21. | TERMINATION |
21.1 | This Agreement and all corresponding rights of a Shareholder hereunder shall automatically terminate, upon happening of any of the following events, in the manner and to the extent stated below: |
(a) | the completion of a QIPO by the Company, except for the provisions contained in Clause 21.4 below; |
(b) | the completion of the Buy-Back by the Company, such that the Investors no longer hold Equity Securities in the Company; |
(c) | the exercise of the Drag Right by the Investors or IFC or DEG or Proparco alone (as the case may be), resulting in the Investors no longer holding any Equity Securities in the Company; or |
(d) | on the mutual agreement of the Parties. |
21.2 | The rights and obligations of the Parties under this Agreement, which either expressly or by their nature survive the termination of this Agreement including the Liquidation Preferences and Governing Law and Arbitration, and any other agreements entered into by some or all of the Parties shall not be extinguished by termination of this Agreement. |
21.3 | The termination of this Agreement in any of the circumstances aforesaid shall not in any way affect or prejudice any right accrued to any Party against the other Parties, prior to such termination. |
21.4 | The following provisions shall survive the termination of this Agreement on the completion of QIPO of the Company, and the Company and the Sponsors shall ensure that these provisions are incorporated in the Articles that will be applicable after the QIPO of the Company: |
(a) | For so long as IFC and GIF together hold at least 5% (five percent) of the share capital of the Company, the decisions on matters mentioned below shall not be taken and/or implemented by the Company unless approved by the shareholders of the Company by way of a special resolution (as understood under Mauritian law): |
i. | amendment to the articles of association or memorandum of association of AZI and its Subsidiaries; provided that any amendment to the articles of association or memorandum of association of the Subsidiaries (other than AZI) shall not require approval of the shareholders of the Company under this Clause 21.4(a)(i) if such amendment to the articles of association or memorandum of association of the Subidiaries (other than AZI) is carried out pursuant to a project finance, working capital limits, non-fund based facilities, mezzanine financing (if the amount raised is less than 20% of the paid-up share capital of |
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the Company) or any other financing arrangements (if the amount raised is less than 20% of the paid-up share capital of the Company) raised for the Subsidiaries (other than AZI) that have been approved by the Board or Board delegated committee of the Company; |
ii. | disposal or sale of more than 50% of Companys assets (on a consolidated basis), or enter into a transaction where the Company will incur obligations or liabilities (on a consolidated basis) the value of which is more than 50% of the Companys assets (on a consolidated basis) before such transaction; |
iii. | any change in the Business of the Company or its Subsidiaries; and |
iv. | amendment to the ESOP plan approved by the Board. |
(b) | For so long as IFC and/or GIF hold any Equity Shares in the Company, the Company shall not issue Equity Shares or Share Equivalents of the Company that are more than 10% (ten percent) of the share capital of the Company unless approved by the shareholders of the Company by way of an ordinary resolution (as understood under Mauritian law). |
(c) | The policy covenants as agreed by the Company, and for which the Company shall execute, and the Sponsors shall ensure that the Company executes, such agreements as may be required by one or more Investors to ensure that these provisions apply after the QIPO of the Company. |
22. | CONFIDENTIALITY |
22.1 | None of the Parties may represent views of any of the Investors on any matter, or use their name in any written material provided to third parties, without their prior written consent. |
22.2 | No Party shall: |
(i) | disclose any information either in writing or orally to any Person which is not a Party to this Agreement; or |
(ii) | make or issue a public announcement, communication or circular, |
about the investments made by the Investors in the Company or the subject matter of, or the transactions referred to in, this Agreement or any other Transaction Document, including by way of press release, promotional and publicity materials, posting of information on websites, granting of interviews or other communications with the press, or otherwise, other than: (A) to such of its, officers, employees and advisers as reasonably require such information in connection with the execution of the transaction contemplated in this Agreement or to comply with the terms of this Agreement or any other Transaction Documents; (B) to the extent required by Law or regulation (including the rules of any stock exchange on which such Partys shares are listed); (C) to the extent required for it to enforce its rights under this Agreement; (D) with the prior written consent of the Investors; and (E) to the direct or indirect investors or limited partners of GIF. Before any information is disclosed or any public announcement, communication or circulation is made or issued pursuant to this Clause, such relevant Party must consult with the Investors in advance about the timing, manner and content of the disclosure, announcement, communication or circulation (as the case may be).
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22.3 | Each relevant Party shall expressly inform any Person to whom it discloses any information under this Clause 22 of the restrictions set out in Clause 22 with regards disclosure of such information and shall procure their compliance with the terms of this Clause 22 as if they each were a party to this Agreement as such relevant Party and such relevant Party shall be responsible for any breach by any such Person of the provisions of this Clause 22. |
22.4 | DEG is a wholly-owned subsidiary of Kreditanstalt Fuer Wiederaufbau ( KFW ) and a member of the KfW bankengrupee (which includes KfW, DEG, FuB- Finanzierungs-und Beratungsgesellschaft mbH, Berlin and such further entities as may be listed on the website of the KfW Bankengruppe (www.kfw.de)) . As central corporate risk management and standardised controlling is performed at a group level, it may be necessary to forward special client data and/or documents within the KfW Bankengrouppe. This client data and/or documents may include data provided by the client and documents and data developed by DEG relating to the client. The Parties hereto agree that DEG shall be entitled to disclose confidential information (e.g. any data as to legal status, business and financial condition, privacy data, etc.) it receives in connection with this investment to any member of the KfW Bankengruppe at any given date, provided that the client data and/or documents will be forwarded exclusively to members of the KfW Bankengruppe and will not be made available to any person outside the KfW Bankengruppe. All members of the KfW Bankengruppewill treat any client data forwarded to them in compliance with the legal provisions as prescribed by the Federal Data Protection Law ( Bundesdatenschutzgesetz ) and the rules on banking secrecy. With reference to the above information the Company hereby agrees to the transfer of client data within the KfW Bankengruppe for the purposes of central corporate risk management and standardised controlling and to such extent, expressly releases DEG from banking secrecy rules, the provisions of the Federal Data Protection Law ( Bundesdatenschutzgesetz ) and any separately concluded confidentiality agreement. |
23. | GOVERNING LAW AND ARBITRATION |
23.1 | This Agreement shall be governed by English law. |
23.2 | Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination (a Dispute ) shall be referred to and finally resolved by arbitration under the Rules of Arbitration of the Singapore International Arbitration Centre (the SIAC ) in force at that time (the SIAC Rules ), which SIAC Rules are deemed to be incorporated by reference into this Clause 23. |
23.3 | There shall be 1 (one) arbitrator, who shall be nominated by agreement of the parties within 30 (thirty) days of receipt of the request for arbitration by the respondent(s). If the sole arbitrator is not nominated within this time period, the SIAC shall make the appointment. |
23.4 | The juridical seat of arbitration shall be Singapore. |
23.5 | The language of arbitration shall be English. |
23.6 | The parties acknowledge and agree that no provision of this Agreement or of the SIAC Rules, nor the submission to arbitration by IFC, in any way constitutes or implies a waiver, termination or modification by IFC of any privilege, immunity or exemption of IFC granted in the Articles of Agreement establishing IFC, international conventions, or applicable Law. |
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23.7 | If two or more arbitrations are commenced hereunder and/or the Related Agreements, and even if this Agreement and the Related Agreements are governed by different laws, any party to any of these arbitrations may petition any arbitral tribunal appointed in these arbitrations for an order that the several arbitrations be consolidated in a single arbitration before that arbitral tribunal (a Consolidation Order ). In deciding whether to make such a Consolidation Order, the arbitral tribunal shall consider whether the several arbitrations raise common issues of law or facts and whether to consolidate the several arbitrations would serve the interests of justice and efficiency. If before a Consolidation Order is made by an arbitral tribunal with respect to another arbitration, the arbitrator has already been appointed in that other arbitration, their appointment terminates upon the making of such Consolidation Order and they are deemed to be functus officio without prejudice to the validity of any acts done or orders made by them prior to the termination. In the event of two or more conflicting Consolidation Orders, the Consolidation Order that was made first in time shall prevail. |
23.8 | The provisions of this Clause 23 shall survive the termination of this Agreement for any reason whatsoever. |
24. | NOTICES |
24.1 | Any notice and other communications provided for in this Agreement shall be in writing and shall be first transmitted by facsimile transmission and then confirmed by postage, prepaid registered post with acknowledgement due or by internationally recognized courier service, in the manner as elected by the Party giving such notice |
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Investors: |
DEG- Deutsche Investitions- und Entwicklungsgesellschaft mbH
Kammergasse 22, 50676 Cologne Germany. Facsimile- +49221 4986 1106 Attention: Portfolio Management Asia
With a copy of the notice to be sent to: DEG Representative Office, 21, Jor Bagh, First Floor, New Delhi 110003, India Facsimile: +91 11 24653108 |
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Helion Venture Partners II, LLC International Management (Mauritius) Ltd Les Cascades Building Edith Cavell Street Port Louis, Mauritius |
||
Facsimile: (230) 212 9833 For attention of: Mr. Sanjeev Agarwal |
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Helion Venture Partners India II, LLC International Management (Mauritius) Ltd Les Cascades Building Edith Cavell Street Port Louis, Mauritius |
||
Facsimile: (230) 212 9833 For attention of: Mr. Sanjeev Agarwal |
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FC VI India Venture (Mauritius) Ltd. | ||
International Financial Services Limited IFS Court, Bank Street, TwentyEight CyberCity, Ebène 72201, Republic of Mauritius | ||
Fax No: +230 467 4000 For attention of: Pratima Woodhoo - Ajageer; pwoodhoo@ifsmauritius.com |
||
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IFC GIF Investment Company I | ||
c/o Cim Fund Services Ltd, 33 Edith Cavell Street Port Louis, Mauritius Facsimile: + 2302129833 Attention: Ashraf Ramtoola |
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Copy to: 2121 Pennsylvania Avenue, NW Washington DC 20433 Attention: Viktor Kats |
||
International Finance Corporation 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 United States of America Facsimile: +1 (202) 974-4307 Attention: Mr. Sujoy Bose, Director, Infrastructure and Natural Resources |
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Copy (in the case of communications relating to payments) sent to the attention of: The Director, Department of Financial Operations Facsimile: +1 (202) 522-3064. | ||
Copy to: IFCs South Asia Department at 3rd and 4th Floor, Maruti Suzuki Building, Plot No. 1, Nelson Mandela Road, Vasant Kunj, New Delhi - 110070, India, Facsimile Number (91-11) 4111-1001 |
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Proparco 151 Rue Saint Honoré 75001 Paris France Facsimile: +33 1 53 4438 38 Attention: Head of Private Equity Division |
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With a copy (in the case of communications relating to payments) sent to the attention of the Director, Department of Financial Operations, at: Facsimile: +33 1 53 44 42 94 |
24.2 | All notices shall be deemed to have been validly given (i) immediately, upon receipt of the confirmation report, if transmitted by facsimile transmission, or (ii) 7 (seven) days after posting if sent by registered post, or (iii) 4 (four) days from the date of dispatch, if sent by courier. |
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24.3 | Any Party may, from time to time, change its address, facsimile number or representative for receipt of notices provided for in this Agreement by giving to the other not less than 15 (fifteen) Business Days prior written notice. |
25. | MISCELLANEOUS PROVISIONS |
25.1 | Injunctive Relief |
In the event of a breach, the non-breaching Party shall be entitled to obtain an injunction restraining any further apprehended breach in accordance with the terms of this Agreement without the necessity of establishing any actual damage.
25.2 | Waiver |
No forbearance, indulgence or relaxation or inaction by any Party at any time to require performance of any of the provisions of this Agreement shall in any way affect, diminish or prejudice the right of such Party to require performance of that provision. Any waiver or acquiescence by any Party of any breach of any of the provisions of this Agreement shall not be construed as a waiver or acquiescence of any right under or arising out of this Agreement or of the subsequent breach, or acquiescence to or recognition of rights other than as expressly stipulated in this Agreement.
25.3 | Cumulative Rights |
All remedies of the Parties under this Agreement whether provided herein or conferred by statute, civil law, common law, custom, trade, or usage are cumulative and not alternative and may be enforced successively or concurrently.
25.4 | Partial Invalidity |
If any provision of this Agreement is held to be illegal, invalid or unenforceable under any law from time to time: (a) such provision will be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; and (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance here from.
25.5 | Amendments |
No modification or amendment to this Agreement and no waiver of any of the terms or conditions hereof shall be valid or binding unless made in writing and duly executed by the Parties to this Agreement.
25.6 | Assignment |
This Agreement and all of the rights and obligations under it may be assigned or transferred by each of the Investors, at their sole discretion, to any Person to whom they transfer Equity Securities held by them in accordance with the provisions of this Agreement. The rights and obligations of Sponsors and the Company under this Agreement are personal to them
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respectively and neither the Company nor the Sponsors may assign all or part of its respective rights or obligations under this Agreement without the prior written consent of each of the Investors.
25.7 | Conflicts |
In the event of any conflict between the terms of this Agreement and those of the Articles, as amongst the Parties hereto, and the Company, to the extent permitted by Law, the terms of this Agreement shall prevail and the Parties shall take all such steps as are within their powers, to ensure that the terms and conditions of this Agreement are adhered to, and to the extent possible under the relevant Laws effect such amendments or alterations to the Articles to carry out the conditions of this Agreement in letter and in spirit.
25.8 | Entirety |
This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and shall supersede all other agreements, arrangements, understandings and assurances, either written or oral, existing or proposed, between all or amongst any two or more Parties hereto or their Affiliates including with any third party relating to the subject matter hereof (other than AZI Shareholders Agreement, Series H CCPS Lock-in Agreements, Sponsor Lock-in Agreement, Registration Rights Agreement and APGL Sharing Agreement).
25.9 | Headings |
The paragraph headings contained in this Agreement are for the convenience of the Parties and shall not affect the meaning or interpretation of this Agreement.
25.10 | Relationship |
None of the provisions of this Agreement shall be deemed to constitute a partnership between the Parties hereto and no Party shall have any authority to bind or shall be deemed to be the agent of the other in any way.
25.11 | Costs |
Each of the Parties hereto shall pay their own costs and expenses relating to the negotiation, preparation, and execution of this Agreement and the transactions contemplated by this Agreement.
Notwithstanding anything stated above, the Company shall pay the fees and expenses of the Investors legal counsels incurred in connection with the negotiation, preparation, and execution of this Agreement.
25.12 | Counterparts |
This Agreement may be executed in several counterparts, each of which is an original, but all of which constitute one and the same agreement.
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25.13 | Immunity |
To the extent any Relevant Party may be entitled in any jurisdiction to claim for itself or its Assets immunity in respect of its obligations under this Agreement or any other Transaction Document from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process or to the extent that in any jurisdiction that immunity (whether or not claimed) may be attributed to it or its Assets, such Relevant Party irrevocably agrees not to claim and irrevocably waives such immunity to the fullest extent permitted now or in the future by the laws of such jurisdiction.
25.14 | Saving of Rights |
(a) | The rights and remedies of IFC and/or DEG in relation to any misrepresentation or breach of warranty on the part of any of the Relevant Parties shall not be prejudiced by any investigation by or on behalf of IFC and/or DEG into the affairs of any of the Relevant Parties, by the execution or the performance of this Agreement or by any other act or thing by or on behalf of IFC which might prejudice such rights or remedies. |
(b) | No course of dealing and no failure or delay by IFC and/or DEG in exercising any power, remedy, discretion, authority or other right under this Agreement or any other agreement shall impair, or be construed to be a waiver of or an acquiescence in, that or any other power, remedy, discretion, authority or right under this Agreement, or in any manner preclude its additional or future exercise. |
-----XXX-----
(Intentionally left blank)
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IN WITNESS WHEREOF , the Parties have herein set their hands on the day month and year first hereinabove mentioned:
SIGNED AND DELIVERED BY MR. INDERPREET SINGH WADHWA
/s/ Mr. Inderpreet Singh Wadhwa
SIGNED AND DELIVERED BY MR. HARKANWAL SINGH WADHWA
/s/ Mr. Harkanwal Singh Wadhwa
SIGNED AND DELIVERED BY AZURE POWER GLOBAL LIMITED BY THE HAND OF ( the Authorised Signatory) PURSUANT TO THE RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF AZURE POWER GLOBAL LIMITED
/s / Mr. Inderpreet Singh Wadhwa |
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IN WITNESS WHEREOF , the Parties have herein set their hands on the day month and year first hereinabove mentioned:
/s/ [SIGNATURE ILLEGIBLE]
SIGNED AND DELIVERED BY HELION VENTURE PARTNERS II, LLC BY THE HAND OF [ILLEGIBLE] (the Authorised Signatory)
/s/ [SIGNATURE ILLEGIBLE]
SIGNED AND DELIVERED BY HELION VENTURE PARTNERS INDIA II, LLC BY THE HAND OF [ILLEGIBLE] (the Authorised Signatory)
/s/ [SIGNATURE ILLEGIBLE] |
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IN WITNESS WHEREOF, the Party has herein set its hand on the day month and year first hereinabove mentioned:
SIGNED AND DELIVERED BY FC VI INDIA VENTURE (MAURITIUS) LTD. BY THE HAND OF Dilshaad Rajabalee (the Authorised Signatory) |
/s/ Dilshaad Rajabalee |
Signature Page to Shareholders Agreement dated 22 July 2015
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IN WITNESS WHEREOF, the Party has herein set its hand on the day month and year first hereinabove mentioned:
SIGNED AND DELIVERED BY INTERNATIONAL FINANCE CORPORATION BY THE HAND OF PRATIBHA BAJAJ (the Authorised Signatory) PORTFOLIO OFFICER |
/s/ Pratibha Bajaj |
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IN WITNESS WHEREOF, the Party has herein set its hands on the day month and year first hereinabove mentioned:
SIGNED AND DELIVERED BY IFC GIF INVESTMENT COMPANY I BY THE HAND OF [ILLEGIBLE] (the Authorised Signatory) |
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IN WITNESS WHEREOF, the Parties has herein set its hand on the day month and year first hereinabove mentioned:
SIGNED AND DELIVERED BY SOCIÉTÉ DE PROMOTION ET DE PARTICIPATION POUR LA COOPÉRATION ECONOMIQUE S.A. BY THE HAND OF Amaury MULLIEZ Deputy CEO (the Authorised Signatory) | ||||
/s/ Amaury MULLIEZ |
||||
Deputy CEO |
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IN WITNESS WHEREOF, the Party has herein set its hand on the day month and year first hereinabove mentioned:
SIGNED AND DELIVERED BY DEG - DEUTSCHE INVESTITIONS - UND ENTWICKLUNGSGESELLSCHAFT MBH BY THE HAND OF (the Authorised Signatory) | ||||
/s/ Dr. Guide Harpering Dr.Guide Harpering Legal Counsel |
/s/ Anne Scheffler Anne Scheffler Investment Manager |
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SCHEDULE A DEED OF ADHERENCE
THIS DEED OF ADHERENCE is made on [ ]
BY [ ] of [ ] (the Covenantor ) in favor of the persons whose names are set out in the Appendix to this Deed and is supplemental to the Shareholders Agreement, dated [●], between Azure Power Global Limited, Helion, FC, IFC, DEG, GIF, Proparco and the Sponsors (the Shareholders Agreement ) and entered into pursuant to the terms thereof.
THIS DEED WITNESSES as follows:
(1) | The Covenantor confirms that it has been given and read a copy of the Shareholders Agreement and hereby agrees for the benefit of each person named in the Appendix to this Deed and each other person who, after the date, of this Deed, executes a deed of adherence to the Shareholders Agreement substantially in the form set out in Schedule A thereof that it shall have the rights and be subject to the obligations of a [Sponsor]/[other Shareholder]/[Helion and FC]/[IFC]/[DEG]/[Proparco]/[GIF] under the terms of the Shareholders Agreement. |
(2) | The Covenantor, by execution of this Deed, makes the representations and warranties contained in Clause 3 of the Shareholders Agreement for the benefit of the other parties to the Shareholders Agreement, provided that such representations, warranties and acknowledgement shall be made as of the date of this Deed and not as of the date of the Shareholders Agreement. |
(3) | This Deed arising out of or in connection with it shall be governed by English law. |
IN WITNESS WHEREOF this Deed has been executed by the Covenantor and is intended to be and is hereby delivered on the date first above written.
Executed as a deed [●]
Signature
APPENDIX TO DEED OF ADHERENCE
[ Insert names of those persons who are party to the Shareholders Agreement on the date of this Deed of Adherence. ]
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SCHEDULE B PFIC ANNUAL INFORMATION STATEMENT
(1) | This questionnaire applies to the taxable year of Azure Power Global Limited (the Company) beginning on January 1, 20 , and ending on December 31, 20 . |
(2) | PLEASE CHECK HERE IF 75% OR MORE OF THE COMPANYS GROSS INCOME CONSTITUTES PASSIVE INCOME. |
Passive income : For purposes of this test, passive income includes:
| Dividends, interests, royalties, rents and annuities, excluding, however, rents and royalties which are received from an unrelated party in connection with the active conduct of a trade or business. |
| Net gains from the sale or exchange of property |
| which gives rise to dividends, interest, rents or annuities (excluding, however, property used in the conduct of a banking, finance or similar business, or in the conduct of an insurance business); |
| which is an interest in a trust, partnership, or REMIC; or |
| which does not give rise to income. |
| Net gains from transactions in commodities. |
| Net foreign currency gains. |
| Any income equivalent to interest. |
Look-through rule : if the Company owns, directly or indirectly, 25% of the stock by value of another corporation, the Company must take into account its proportionate share of the income received by such other corporation.
(3) | PLEASE CHECK HERE IF THE AVERAGE FAIR MARKET VALUE DURING THE TAXABLE YEAR OF PASSIVE ASSETS HELD BY THE COMPANY EQUALS 50% OR MORE OF THE AVERAGE FAIR MARKET VALUE OF ALL OF THE COMPANYS ASSETS. |
Note : This test is applied on a gross basis; no liabilities are taken into account.
Passive Assets : For purposes of this test, passive assets are those assets which generate (or are reasonably expected to generate) passive income (as defined above). Assets which generate partly passive and partly non-passive income are considered passive assets to the extent of the relative proportion of passive income (compared to non-passive income) generated in a particular taxable year by such assets. Please note the following:
| A trade or service receivable is non-passive if it results from sales or services provided in the ordinary course of business. |
| Intangible assets that produce identifiable items of income, such as patents or licenses, are characterized in terms of the type of income produced. |
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| Goodwill and going concern value must be identified to a specific income producing activity and are characterized in accordance with the nature of that activity. |
| Cash and other assets easily convertible into cash are passive assets, even when used as working capital. |
| Stock and securities (including tax-exempt securities) are passive assets, unless held by a dealer as inventory. |
Average value : For purposes of this test, average fair market value equals the average quarterly fair market value of the assets for the relevant taxable year.
Look-through rule : if the Company owns, directly or indirectly, 25% of the stock by value of another corporation, the Company must take into account its proportionate share of the passive assets of such other corporation.
(4) | PLEASE CHECK HERE IF (A) MORE THAN 50% OF THE COMPANYS STOCK (BY VOTING POWER OR BY VALUE) IS OWNED BY FIVE OR FEWER U.S. PERSONS OR ENTITIES AND (B) THE AVERAGE AGGREGATE ADJUSTED TAX BASES (AS DETERMINED UNDER U.S. TAX PRINCIPLES) DURING THE TAXABLE YEAR OF THE PASSIVE ASSETS HELD BY THE COMPANY EQUALS 50% OR MORE OF THE AVERAGE AGGREGATE ADJUSTED TAX BASES OF ALL OF THE COMPANYS ASSETS. |
Average value : For purposes of this test, average aggregate adjusted tax bases equals the average quarterly aggregate adjusted tax bases of the assets for the relevant taxable year.
Look-through rule : if the Company owns, directly or indirectly, 25% of the stock by value of another corporation, the Company must take into account its proportionate share of the passive assets of such other corporation
(5) | INVESTOR HAS THE FOLLOWING PRO-RATA SHARE OF THE ORDINARY EARNINGS AND NET CAPITAL GAIN OF THE COMPANY AS DETERMINED UNDER U.S. INCOME TAX PRINCIPLES FOR THE TAXABLE YEAR OF THE COMPANY: |
Ordinary Earnings: (as determined under U.S. income tax principles)
Net Capital Gain: (as determined under U.S. income tax principles)
Pro Rata Share : For purposes of the foregoing, the shareholders pro rata share equals the amount that would have been distributed with respect to the shareholders stock if, on each day during the taxable year of the Company, the Company had distributed to each shareholder its pro rata share of that days ratable share (determined by allocating to each day of the year, an equal amount of the Companys aggregate ordinary earnings and aggregate net capital gain for such year) of the Companys ordinary earnings and net capital gain for such year. Determination of a shareholders pro rata share will require reference to the Companys charter, certificate of incorporation, articles of association or other comparable governing document.
(6) | The amount of cash and fair market value of other property distributed or deemed distributed by Company to Investor during the taxable year specified in paragraph 1 is as follows: |
Cash:
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Fair Market Value of Property:
(7) | Company will permit Investor to inspect and copy Companys permanent books of account, records, and such other documents as may be maintained by Company that are necessary to establish that PFIC ordinary earnings and net capital gain, as provided in Section 1293(e) of the U.S. Internal Revenue Code of 1986, as amended (or any successor provision thereto), are computed in accordance with U.S. income tax principles. |
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SCHEDULE C TERMS AND CONDITIONS OF SERIES A CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series A CCPS shall have the issue price as indicated in Schedule Y of this Agreement.
2. | Dividend |
Each of the holders of Series A CCPS shall be entitled to payment of 8% non-cumulative dividend per annum on each of the Series A CCPS (calculated on the issue price) by way of dividend from the Company in accordance with applicable Law as and when the board of the Company declares any dividend. The dividends payable on the Series A CCPS shall be senior to dividend payments to holders of other Equity Shares of the Company.
Subject to applicable Law, each of the holders of Series A CCPS shall be individually entitled, in addition and cumulative to the above, to participate in the distribution of the profits of the Company made to the other shareholders of the Company (for the purpose of this paragraph all the Series A CCPS shall be assumed as if have been converted to Equity Shares at the applicable Conversion Factor).
For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series A CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the dividend is paid out by the Company.
3. | Term |
Unless converted in accordance with the terms of this Schedule C, the Articles of the Company and applicable Laws, the term of the Series A CCPS shall be a maximum of 19 (nineteen) years from the date of issue of Series A CCPS.
4. | Voting |
4.1 | From and after the issuance of the Series A CCPS, the voting rights of each Series A CCPS on every resolution placed before the Company shall, be in proportion to the share capital that the Series A CCPS represent, assuming the Series A CCPS has been converted into Equity Shares of the Company on the basis of the applicable Conversion Factor (as defined below). |
4.2 | From the date of conversion of the Series A CCPS into the Equity Shares, the voting percentage of their holders in the Company shall be in proportion to their shareholding in the Company. |
5. | Conversion |
5.1 |
The Series A CCPS shall be convertible into Equity Shares of the Company at the option of the |
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holders of the Series A CCPS in accordance with paragraph 5.2. Any Series A CCPS that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company in accordance with paragraph 5.3 below, upon the earlier of:
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 19 (nineteen) years from the date of the issuance of the Series A CCPS (the Maturity Date ), |
in each case, in accordance with the SHA.
5.2 | Optional Conversion |
(i) | The holders of the Series A CCPS shall severally have the right, at any time and from time to time at their sole option after their issuance, to require the Company, by written notice (the Conversion Notice ), to convert their respective Series A CCPS into Equity Shares of the Company. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice. The Series A CCPS will be convertible into Equity Shares of the Company at a conversion ratio of 1:1 (the Conversion Factor ), without being required to pay any amount for such conversion. However, if the holders of Series A CCPS are unable to receive amounts equal to their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA (as applicable) on the basis of the Conversion Factor of 1:1, then each Series A CCPS shall be converted at such higher conversion ratio that will permit the holders of Series A CCPS to receive the amounts that they are entitled under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA, as applicable; in which event the term Conversion Factor shall be reckoned accordingly. For avoidance of doubts, the holders of Series A CCPS shall not be entitled to any proceeds over and above their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA, irrespective of the Conversion Factor. |
(ii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of Series A CCPS in respect of which the holders of the Series A CCPS are exercising their right to conversion in accordance with this paragraph 5.2; and |
(b) | The number of Equity Shares of the Company that the Series A CCPS shall convert into. |
(iii) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company shall approve the following: |
(A) | The conversion of the relevant Series A CCPS; |
(B) | The cancellation of the share certificates representing such number of the Series A CCPS; and |
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(C) | The issuance and allotment of such number of Equity Shares of the Company that the Series A CCPS shall convert into, |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of Series A CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter the issuance of duly stamped share certificates to the holders of the Series A CCPS to evidence such holders of the Series A CCPS as the owners of the Equity Shares issued upon conversion of their respective Series A CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series A CCPS as the owners of the Equity Shares issued pursuant to the conversion of the relevant Series A CCPS as mentioned in the Conversion Notice; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provisions of this paragraph 5, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series A CCPS. |
5.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series A CCPS into shares, based on the Conversion Factor, if at any time after their issuance, the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series A CCPS shall convert into Equity Shares of the Company at the Conversion Factor immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO/IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the Series A CCPS into Equity Shares of the Company prior to the completion of Such IPO or QIPO; and |
(b) | The QIPO/IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market on or prior to the Listing Date, |
then such conversion of Series A CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 ( Reinstatement of Rights ) of this SHA and shall undertake all necessary actions to ensure that the holders of the Series A CCPS are placed in the same position, and possess the same rights as set forth in this Schedule C, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
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6. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries in accordance with the terms of the SHA, or upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clauses 6.4 and 6.5 of the SHA, the holders of the Series A CCPS shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
Notwithstanding the above, the holders of the Series A CCPS will also be entitled to the buyback preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of Series A CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement to the amounts invested in Series A CCPS. However, to the extent relevant, at the time of payment of amounts to the holders of Series A CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
7. | Transferability |
Subject to the terms of the SHA, the Series A CCPS shall be freely transferable to any Person, and the holders of the Series A CCPS may assign all or any of the Series A CCPS and any rights attaching thereto under the SHA, without the prior consent of any Person.
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SCHEDULE D TERMS AND CONDITIONS OF SERIES B CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series B CCPS shall have the issue price as indicated in Schedule Y of this Agreement.
2. | Dividend |
Each of the holders of Series B CCPS shall be entitled to payment of 8% (eight per cent) non-cumulative dividend per annum (calculated on the sum of the par value and premium paid) on each of the Series B CCPS by way of dividend from the Company in accordance with applicable Law as and when the Board of the Company declares any dividend. The dividends payable on the Series B CCPS shall be senior to dividend payments to holders of Series A CCPS and other Equity Shares of the Company.
Subject to applicable Law, each of the holders of Series B CCPS shall be individually entitled, in addition and cumulative to the above, to participate in the distribution of the profits of the Company made to the other shareholders of the Company (for the purpose of this paragraph all the Series B CCPS shall be assumed as if have been converted to Equity Shares at the Conversion Factor).
For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series B CCPS shall be considered in INR terms by applying the USD-INR conversion rate price as indicated in Schedule Y of this Agreement. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the dividend is paid out by the Company.
3. | Term |
Unless converted in accordance with the terms of this Schedule, the Articles of the Company and applicable Laws, the term of the Series B CCPS shall be a maximum of 20 (twenty) years from the date of their issuance.
4. | Voting |
4.1 | From and after the issuance of the Series B CCPS, the voting rights of each Series B CCPS on every resolution placed before the Company shall, be in proportion to the share capital that the Series B CCPS represent, assuming the Series B CCPS have been converted into Equity Shares of the Company on the basis of the Conversion Factor set out below. |
4.2 | From the date of conversion of the Series B CCPS into the Equity Shares, the voting percentage of their holders in the Company shall be in proportion to their shareholding in the Company. |
5. | Conversion |
5.1 |
The Series B CCPS shall be convertible into Equity Shares of the Company at the option of the |
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holders of the Series B CCPS in accordance with paragraph 5.2. Any Series B CCPS that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company in accordance with paragraph 5.3 below, upon the earlier of:
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the date of the issuance of the Series B CCPS (the Maturity Date ), |
in each case, in accordance with the terms of this Agreement.
5.2 | Optional Conversion |
(i) | The holders of the Series B CCPS shall severally have the right, at any time and from time to time at their sole option after their issuance, to require the Company, by written notice (the Conversion Notice ), to convert their respective Series B CCPS into Equity Shares of the Company. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice. The Series B CCPS will be convertible into Equity Shares of the Company at a conversion ratio of 1:1 (the Conversion Factor ), without being required to pay any amount for such conversion. However, if the holders of Series B CCPS are unable to receive amounts equal to their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA (as applicable) on the basis of the Conversion Factor of 1:1, then each Series B CCPS shall be converted at such higher conversion ratio that will permit the holders of Series B CCPS to receive the amounts that they are entitled under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9, of the SHA, as applicable; in which event the term Conversion Factor shall be reckoned accordingly. For avoidance of doubts, the holders of Series B CCPS shall not be entitled to any proceeds over and above their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA, irrespective of the Conversion Factor. |
(ii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of Series B CCPS in respect of which the holders of the Series B CCPS are exercising their right to conversion in accordance with this paragraph 5.2; and |
(b) | The number of Equity Shares of the Company that the Series B CCPS shall convert into. |
(iii) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company shall approve the following: |
(A) | The conversion of the relevant Series B CCPS; |
(B) | The cancellation of the share certificates representing such number of the Series B CCPS; and |
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(C) | The issuance and allotment of such number of Equity Shares of the Company that the Series B CCPS shall convert into, |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of Series B CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the Series B CCPS to evidence such holders of the Series B CCPS as the owners of the Equity Shares issued upon conversion of their respective Series B CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series B CCPS as the owners of the Equity Shares issued pursuant to the conversion of the relevant Series B CCPS as mentioned in the Conversion Notice; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provisions of this paragraph 5, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series B CCPS. |
5.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series B CCPS into shares, based on the Conversion Factor, if at any time after their issuance the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series B CCPS shall convert into Equity Shares of the Company at the Conversion Factor, immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO/IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the Series B CCPS into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | The QIPO/IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market on or prior to the Listing Date, |
then such conversion of Series B CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 ( Reinstatement of Rights ) of this Agreement and shall undertake all necessary actions to ensure that the holders of the Series B CCPS are placed in the same position, and possess the same rights as set forth in this Schedule D, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
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6. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or Liquidation Event B with respect to the Company or its Subsidiaries and in accordance with the terms of this Agreement, the holders of the Series B CCPS shall receive the Liquidation Preference in accordance with the terms of this Agreement and in the order of precedence set forth in this Agreement.
Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of this Agreement, the Series B CCPS shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in this Agreement. Notwithstanding the above, the holders of the Series B CCPS will also be entitled to the buyback preferences in accordance with the terms of this Agreement and in order of preference set forth in this Agreement.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of Series B CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement to the amounts invested in Series B CCPS. However, to the extent relevant, at the time of payment of amounts to the holders of Series B CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
7. | Transferability |
Subject to the terms of this Agreement, the Series B CCPS shall be freely transferable to any Person, and the holders of the Series B CCPS may assign all or any of the Series B CCPS and any rights attaching under the Transaction Documents, without the prior consent of any Person.
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SCHEDULE E TERMS AND CONDITIONS OF IFC CCDS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Form And Status of the IFC CCDs |
The IFC CCDs shall have the issue price of USD 4.95 (United States Dollars Four and Ninety Five Cents).
2. | Term |
Unless converted in accordance with the terms of this Schedule E, the Articles of the Company and applicable Laws, the term of the IFC CCDs shall be a maximum of 20 (twenty) years from their issuance. The date on which the IFC CCDs were issued and allotted to IFC shall be referred as CCDs Closing Date .
3. | Interest |
3.1 | The IFC CCDs will bear interest at the rate of 10% (ten percent) per annum up to the date of this conversion into Equity Shares of the Company in accordance with the paragraph 4 below. |
3.2 | The interest will accrue for a period of 18 (eighteen) months from issuance of the IFC CCDs and will be paid at the end of this period, subject to applicable Law, followed by quarterly payments on the 15 th (fifteenth) day of the relevant month of such quarterly payment until the date of conversion and the interest payable in respect of each calendar year shall be calculated by dividing the annual interest due by 365 (three hundred and sixty five). In relation to such interest payments, IFC shall provide its account details no later than 1 (one) month before the payment is due. If full interest payment cannot be made during an applicable period, due to regulatory constraints, then the unpaid interest payment will accrue and be paid in subsequent periods, compounded for the period of delay in payment. |
3.3 | If the dividend payout in any given Financial Year to the Shareholders or to the holders of Series A CCPS or to the holders of Series B CCPS or to the holders of Series C CCPS of the Company, whichever is highest, is more than 10% (ten percent) of the amount invested for such securities by the holder of those securities, then the holders of the IFC CCDs will be entitled to an additional interest which shall be equal to the difference between (a) the percentage return (on the amount invested) received by the holders of such Equity Shares or the holders of Series A CCPS or the holders of Series B CCPS or to the holders of Series C CCPS; and (b) the rate of interest received by the holder of the IFC CCDs for that Financial Year, under the terms of paragraph 3.1. |
3.4 | For the purposes of calculation of interest, the issue price (i.e. par value and premium) of each IFC CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 45.32 . The payment of interest shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the interest is paid out by the Company. |
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4. | Conversion |
4.1 | The IFC CCDs shall be convertible into Equity Shares of the Company at the option of the holders of the IFC CCDs in accordance with paragraph 4.2. Any IFC CCDs that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the CCD Closing Date in relation to the IFC CCDs (the Maturity Date ). |
in each case, in accordance with the SHA. Upon occurrence of any of the event under paragraph 4.1(i) and (ii) above, the Company (and the Sponsors, where applicable) will immediately follow the procedure under paragraph 4.2(iv) below.
4.2 | Optional Conversion |
The holders of the IFC CCDs shall have the right, in the events set out in paragraph 4.2 (ii) of this Schedule after the CCD Closing Date, to require the Company, by a written notice (the Conversion Notice ), to convert all or some of the IFC CCDs into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, DEG, Helion, FC and Proparco. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice.
(i) | Conversion Ratio & Conversion Price |
(a) | The Conversion Ratio for the purposes of IFC CCDs shall be such that IFC CCD will convert into such number of Equity Shares so as to give the IFC CCD holder the IFC Required Return (hereinafter defined), without IFC being required to pay any amount for such conversion. |
For purpose of this paragraph, with respect to the IFC CCDs, the term IFC Required Return shall mean (aa) 18% (eighteen percent) IRR; or (bb) 20% (twenty percent) IRR, in the event of conversion of the IFC CCDs into Equity Shares of the Company (a) in accordance with paragraph 4.1 (i) of this Schedule E, or (b) upon Transfer of the Equity Securities in terms of Clause 6.3.4 of the SHA, or (c) upon a voluntary sale of any or all the Equity Securities held by all the Investors and the voluntary sale of Equity Securities held by the Sponsors to a third party, such that pursuant to the sale of the Equity Securities there is a change in Control on the Company, or (d) upon a Liquidation Event B other than upon Transfer of all or more than 70% (seventy per cent) in value of the Companys Assets. For calculating the IFC Required Return, the return of 18% (eighteen percent) IRR or 20% (twenty percent) IRR, as the case may be, shall be calculated from 9 th December 2010 till the date of the conversion of the IFC CCDs.
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Provided that, if the IFC CCD holder receives any interest from the Company prior to conversion, the value of the same will be deducted from the IFC Required Return. Provided further that, any amounts (in INR terms) received by IFC from AZI as interest/coupon on the IFC CCDs (as defined in AZI Shareholders Agreement) issued by AZI to IFC shall be deducted from the IFC Required Return taking into consideration the dates on which such amounts has been remitted by AZI to IFC.
For the calculation of the IFC Required Return, the aggregate investment amounts in IFC CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 45.32 to the IFC CCD Investment Amount.
(b) | A valuation of the Company to enable conversion of the IFC CCDs in accordance with (a) above shall be: |
1) | for the events specified in paragraph 4.2 (ii) (a), (b) and (g) and paragraph 4.1 (ii), the valuation as determined by one of the Big Four Accounting Firms selected in accordance with the procedure laid down in paragraph 4.2(i)(c) below; |
2) | for the events specified in paragraph 4.2(ii) (c), (d), (e) and (f), the valuation as offered by the third party purchaser; and |
3) | for the events specified in paragraph 4.3(i), the valuation per Equity Share (on a Fully Diluted Basis after giving effect to the conversion of all Equity Securities that are convertible to Equity Shares, as provided in the SHA) shall be equal to the initial public offering price of Equity Shares offered for sale/issue of Equity Shares by the Company pursuant to the IPO or QIPO. |
(c) | IFC shall set out in the Conversion Notice, the names of 2 (two) of the Big Four Accounting Firms that are selected by IFC, for the purpose of this paragraph 4.2(i)(c). Within 10 days of the date of the Conversion Notice, IFC, DEG, Helion, FC, Proparco, Company and Sponsors shall jointly agree to appoint 1 (one) of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company, and shall jointly issue a notice to IFC in this respect. If IFC does not receive the aforesaid notice within the period of 10 (ten) days from the date of the Conversion Notice, then IFC shall have the right to select, in its sole discretion, 1 (one) of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company. |
(ii) | The holders of the IFC CCDs will be entitled to exercise their conversion right in respect of the IFC CCDs just prior to or on the occurrence of the following events: |
(a) | Liquidation Event A or Liquidation Event B as defined in the SHA. |
(b) | Buy-back of the IFC CCDs in accordance with the terms of the SHA. |
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(c) | In the event holder of the IFC CCDs wishes to exercise its Co-Sale Right under Clause 6.3.3 (Co-Sale Rights) of the SHA. |
(d) | The event holder of the IFC CCDs wishes to exercise its Co-Sale Right under Clause 6.3.4 (Transfer to a Competitor) of the SHA. |
(e) | In the event holder of the IFC CCDs wishes to exercise its Drag Along Right under Clause 6.4 (Drag Right of the Investors) of the SHA. |
(f) | In the event holder of the IFC CCDs wishes to exercise its right under Clause 6.5 (Drag Right of IFC, DEG and Proparco) of the SHA. |
(g) | In the event holder of the IFC CCDs wishes to exercise the Deficit Call Option under Clause 6.6 (IFC, DEG and Proparco Call Option) of the SHA. |
(iii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of IFC CCDs in respect of which the holders of the IFC CCDs are exercising their right to conversion in accordance with this paragraph 4.2; |
(b) | The number of Equity Shares of the Company that the IFC CCDs shall convert into; and |
(c) | The names of 2 (two) of the Big Four Accounting Firms that are selected by IFC for the purpose of paragraph 4.2 (i)(c), if applicable; and the reference valuation as offered by the third party purchaser, if applicable. |
(iv) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company shall approve the following: |
| The conversion of such number of the IFC CCDs; |
| The cancellation of the certificates representing such number of IFC CCDs that are converted; and |
| The issuance and allotment of such number of Equity Shares of the Company that the IFC CCDs shall convert into. |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the debenture certificates of IFC CCDs in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the IFC CCDs to evidence such holders of the IFC CCDs as the owners of the Equity Shares issued upon conversion of such number of the IFC CCDs as are mentioned in the Conversion Notice; |
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(c) | Updating its register of members to reflect the holders of the IFC CCDs as the owners of the Equity Shares issued pursuant to the conversion of such number of the IFC CCDs as are mentioned in the Conversion Notice; and updating the register of debenture holders to indicate the conversion of the IFC CCDs into Equity Shares; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provision of this paragraph 4, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the IFC CCDs. |
4.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the IFC CCDs into Equity Shares based on the conversion price arrived in accordance with paragraph 4.2(i), if at any time after the CCDs Closing Date the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The IFC CCDs shall convert into Equity Shares of the Company immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(A) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO/IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the IFC CCDs into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(B) | The QIPO or the IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market on or prior to the Listing Date. |
Then such conversion of IFC CCDs into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the SHA, and shall undertake all necessary actions to ensure that the holders of the IFC CCDs are placed in the same position, and possess the same rights as set forth in this Schedule E, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
5 | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries and in terms of the SHA, the holders of the IFC CCDs shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
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Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of the SHA, the IFC CCDs shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in the SHA. Notwithstanding the above, the holders of the IFC CCDs will also be entitled to the buy-back preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by IFC pursuant to the conversion of the IFC CCDs shall be treated at par with the remaining Equity Shares of the Company for the purposes of this paragraph 5, save and except where the IFC CCDs are converted into Equity Shares of the Company on or immediately prior to and only in connection with IFC exercising its right in the case of events set out in this paragraph 5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the IFC CCDs will be entitled to priority in terms of payment in the like manner as the IFC CCDs as set out in this paragraph 5.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of IFC CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 45.32 to the IFC CCD Investment Amount. However, to the extent relevant, at the time of payment of amounts to the holders of IFC CCDs in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
6 | Transferability |
Subject to the terms of the SHA, the IFC CCDs shall be freely transferable to any Person and holders of the IFC CCDs may assign all or any of the IFC CCDs and any rights attaching thereto under the SHA, without the prior consent of any Person.
7 | Voting Rights |
From and after the Transfer of the IFC CCDs in accordance with the terms of the SHA, the transferee of the IFC CCDs will be entitled to vote on every resolution placed before the Company in proportion to the Equity Shares held by such transferee in the share capital of the Company, assuming the transferred IFC CCDs have been converted into Equity Shares of the Company on the basis of the conversion price determined in paragraph 4.2(i) above.
From the date of conversion of the IFC CCDs, the voting percentage of all the shareholders in the Company shall be in proportion to their shareholding in the Company.
For the avoidance of doubt, it is hereby clarified, that IFC shall be entitled to exercise its voting rights as a debenture holder in the Company available to it under applicable Law.
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SCHEDULE F TERMS AND CONDITIONS OF SERIES C CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under this Agreement. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series C CCPS shall have the issue price as indicated in Schedule Y of this Agreement.
2. | Dividend |
Each of the holders of Series C CCPS shall be entitled to payment of 8% (eight per cent) non-cumulative dividend per annum (calculated on the issue price) on each of the Series C CCPS by way of dividend from the Company in accordance with applicable Law as and when the Board of the Company declares any dividend. The dividends payable on the Series C CCPS shall be senior to dividend payments to holders of Series A CCPS and other Equity Shares of the Company.
Subject to applicable Law, each of the holders of Series C CCPS shall be individually entitled, in addition and cumulative to the above, to participate in the distribution of the profits of the Company made to the other shareholders of the Company (for the purpose of this paragraph all the Series C CCPS shall be assumed as if have been converted to Equity Shares at the Conversion Factor).
For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series C CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the dividend is paid out by the Company.
3. | Term |
Unless converted in accordance with the terms of this Schedule, the Articles of the Company and applicable Laws, the term of the Series C CCPS shall be a maximum of 20 (twenty) years from the date of their issuance.
4. | Voting |
4.1 | From and after the issuance of the Series C CCPS, the voting rights of each Series C CCPS on every resolution placed before the Company shall, be in proportion to the share capital that the Series C CCPS represent, assuming the Series C CCPS have been converted into Equity Shares of the Company on the basis of the Conversion Factor set out below. |
4.2 | From the date of conversion of the Series C CCPS into Equity Shares, the voting percentage of their holders in the Company shall be in proportion to their shareholding in the Company. |
5. | Conversion |
5.1 |
The Series C CCPS shall be convertible into Equity Shares of the Company at the option of the |
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holders of the Series C CCPS in accordance with paragraph 5.2. Any Series C CCPS that have not been converted into the Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company in accordance with paragraph 5.3 below, upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the date of the issuance of the Series C CCPS (the Maturity Date ), |
in each case, in accordance with the terms of this Agreement.
5.2 | Optional Conversion |
(i) | The holders of the Series C CCPS shall severally have the right, at any time and from time to time at their sole option after their issuance, to require the Company, by written notice (the Conversion Notice ), to convert their respective Series C CCPS into Equity Shares of the Company. A copy of the Conversion Notice shall be sent to the Sponsors, Proparco, IFC, DEG, FC and Helion. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice. The Series C CCPS will be convertible into Equity Shares of the Company at a conversion ratio of 1:0.3424 (the Conversion Factor ), without being required to pay any amount for such conversion. However, if the holders of Series C CCPS are unable to receive amounts equal to their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA (as applicable) on the basis of the Conversion Factor of 1:0.3424, then each Series C CCPS shall be converted at such higher conversion ratio that will permit the holders of Series C CCPS to receive the amounts that they are entitled under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9, of the SHA, as applicable; in which event the term Conversion Factor shall be reckoned accordingly. For avoidance of doubts, the holders of Series C CCPS shall not be entitled to any proceeds over and above their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA, irrespective of the Conversion Factor. |
(ii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of Series C CCPS in respect of which the holders of the Series C CCPS are exercising their right to conversion in accordance with this paragraph 5.2; and |
(b) | The number of Equity Shares of the Company that the Series C CCPS shall convert into. |
(iii) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company shall approve the following: |
(A) | The conversion of the relevant Series C CCPS; |
(B) |
The cancellation of the share certificates representing such number of |
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the Series C CCPS; and
(C) | The issuance and allotment of such number of Equity Shares of the Company that the Series C CCPS shall convert into, |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of Series C CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the Series C CCPS to evidence such holders of the Series C CCPS as the owners of the Equity Shares issued upon conversion of their respective Series C CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series C CCPS as the owners of the Equity Shares issued pursuant to the conversion of the relevant Series C CCPS as mentioned in the Conversion Notice; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provisions of this paragraph 5, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series C CCPS. |
5.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series C CCPS into shares, based on the Conversion Factor, if at any time after their issuance the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series C CCPS shall convert into Equity Shares of the Company at the Conversion Factor, immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO/IPO and, in connection with such filing such Authority or Relevant Market requires the conversion of the Series C CCPS into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | The QIPO/IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market on or prior to the Listing Date, |
then such conversion of Series C CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 ( Reinstatement of Rights ) of this Agreement and shall undertake all necessary actions to ensure that the holders of the Series C CCPS are placed in the same position, and possess the same rights as set forth in this Schedule F, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
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6. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or Liquidation Event B with respect to the Company or its Subsidiaries, the holders of the Series C CCPS shall receive the Liquidation Preference in accordance with the terms of this Agreement and in the order of precedence set forth in this Agreement.
Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of this Agreement, the Series C CCPS shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in this Agreement. Notwithstanding the above, the holders of the Series C CCPS will also be entitled to the buyback preferences in accordance with the terms of this Agreement and in order of preference set forth in this Agreement.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of Series C CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement to the amounts invested in Series C CCPS. However, to the extent relevant, at the time of payment of amounts to the holders of Series C CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
7. | Transferability |
Subject to the terms of this Agreement, the Series C CCPS shall be freely transferable to any Person, and the holders of the Series C CCPS may assign all or any of the Series C CCPS and any rights attaching under this Agreement, without the prior consent of any Person.
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SCHEDULE G TERMS AND CONDITIONS OF SERIES D CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the Agreement. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series D CCPS shall have the issue price as indicated in Schedule Y of this Agreement.
2. | Dividend |
Each of the holders of Series D CCPS shall be entitled to payment of 8% (eight per cent) non- cumulative dividend per annum (calculated on the issue price) on each of the Series D CCPS by way of dividend from the Company in accordance with applicable Law as and when the Board of the Company declares any dividend. The dividends payable on the Series D CCPS shall be senior to dividend payments to holders of Series A CCPS and other Equity Shares of the Company.
Subject to applicable Law, each of the holders of Series D CCPS shall be individually entitled, in addition and cumulative to the above, to participate in the distribution of the profits of the Company made to the other shareholders of the Company (for the purpose of this paragraph all the Series D CCPS shall be assumed as if have been converted to Equity Shares at the Conversion Factor).
For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series D CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the dividend is paid out by the Company.
3. | Term |
Unless converted in accordance with the terms of this Schedule, the Articles of the Company and applicable Laws, the term of the Series D CCPS shall be a maximum of 20 (twenty) years from the date of their issuance.
4. | Voting |
4.1 | From and after the issuance of the Series D CCPS, the voting rights of each Series D CCPS on every resolution placed before the Company shall be in proportion to the share capital that the Series D CCPS held by such holder represent, assuming the Series D CCPS have been converted into Equity Shares of the Company on the basis of the Conversion Factor set out below. |
4.2 | From the date of conversion of the Series D CCPS into the Equity Shares, the voting percentage of their holders in the Company shall be in proportion to their shareholding in the Company. |
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5. | Conversion |
5.1 | The Series D CCPS shall be convertible into Equity Shares of the Company at the option of the holders of the Series D CCPS in accordance with paragraph 5.2. Any Series D CCPS that have not been converted into the Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company in accordance with paragraph 5.3 below, upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the date of the issuance of the Series D CCPS (the Maturity Date ), |
in each case, in accordance with the terms of this Agreement.
5.2 | Optional Conversion |
(i) | The holders of the Series D CCPS shall severally have the right, at any time and from time to time at their sole option after their issuance, to require the Company, by written notice (the Conversion Notice ), to convert their respective Series D CCPS into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, Proparco, Helion, FC and IFC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice. The Series D CCPS will be convertible into Equity Shares of the Company at a conversion ratio of 1:1 (the Conversion Factor ), without being required to pay any amount for such conversion. However, if the holders of Series D CCPS are unable to receive amounts equal to their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA (as applicable) on the basis of the Conversion Factor of 1:1, then each Series D CCPS shall be converted at such higher conversion ratio that will permit the holders of Series D CCPS to receive the amounts that they are entitled under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA as applicable; in which event the term Conversion Factor shall be reckoned accordingly. For avoidance of doubts, the holders of Series D CCPS shall not be entitled to any proceeds over and above their entitlements under Clause 4.1, Clause 6.4, Clause 6.5 or Clause 9 of the SHA, irrespective of the Conversion Factor. |
(ii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of Series D CCPS in respect of which the holders of the Series D CCPS are exercising their right to conversion in accordance with this paragraph 5.2; and |
(b) | The number of Equity Shares of the Company that the Series D CCPS shall convert into. |
(iii) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company shall approve the following: |
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(A) | The conversion of the relevant Series D CCPS; |
(B) | The cancellation of the share certificates representing such number of the Series D CCPS; and |
(C) | The issuance and allotment of such number of Equity Shares of the Company that the Series D CCPS shall convert into, |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of Series D CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the Series D CCPS to evidence such holders of the Series D CCPS as the owners of the Equity Shares issued upon conversion of their respective Series D CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series D CCPS as the owners of the Equity Shares issued pursuant to the conversion of the relevant Series D CCPS as mentioned in the Conversion Notice; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provisions of this paragraph 5, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series D CCPS. |
5.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series D CCPS into shares, based on the Conversion Factor, if at any time after their issuance the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series D CCPS shall convert into Equity Shares of the Company at the Conversion Factor, immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO/IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the Series D CCPS into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | The QIPO/IPO does not complete on or prior to the Listing date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market on or prior to Listing Date, |
then such conversion of Series D CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 ( Reinstatement of Rights ) of this Agreement and shall undertake all necessary actions to ensure that the holders of the Series D CCPS are placed in the
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same position, and possess the same rights as set forth in this Schedule G, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
6. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or Liquidation Event B with respect to the Company or its Subsidiaries and in accordance with the terms of this Agreement, the holders of the Series D CCPS shall receive the Liquidation Preference in accordance with the terms of this Agreement and in the order of precedence set forth in this Agreement.
Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of this Agreement, the Series D CCPS shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in this Agreement. Notwithstanding the above, the holders of the Series D CCPS will also be entitled to the buy-back preferences in accordance with the terms of this Agreement and in order of preference set forth in this Agreement.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of Series D CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement to the amounts invested in Series D CCPS. However, to the extent relevant, at the time of payment of amounts to the holders of Series D CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
7. | Transferability |
Subject to the terms of this Agreement, the Series D CCPS shall be freely transferable to any Person, and the holders of the Series D CCPS may assign all or any of the Series D CCPS and any rights attaching under the Agreement, without the prior consent of any Person.
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SCHEDULE H- TERMS AND CONDITIONS OF DEG CCDS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA.
Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Form and Status of DEG CCDs |
Each of DEG CCDs shall have the issue price of USD 19.89 (United States Dollar Nineteen and Eighty Nine Cents)
2. | Term |
Unless converted in accordance with the terms of this Schedule H, the Articles of the Company and applicable Laws, the term of the DEG CCDs shall be a maximum of 20 (twenty) years from their issuance. The date on which the DEG CCDs were issued and allotted to DEG shall be referred as Subscription Closing Date .
3. | Interest |
3.1 | The DEG CCDs will bear interest at the rate of 5% (five percent) per annum up to the date of their conversion into Equity Shares of the Company in accordance with paragraph 4 below. |
3.2 | The interest will accrue for a period of 18 (eighteen) months from issuance of the DEG CCDs and will be paid at the end of this period, subject to applicable Law, followed by quarterly payments on the 15 th (fifteenth) day of the relevant month of such quarterly payment until the date of conversion and the interest payable in respect of each calendar year shall be calculated by dividing the annual interest due by 365 (three hundred and sixty five). In relation to such interest payments, DEG shall provide its account details no later than 1 (one) month before the payment is due. If full interest payment cannot be made during an applicable period, due to any constraints including but not limited to regulatory constraints, then the unpaid interest payment will accrue and be paid in subsequent periods, compounded for the period of delay in payment. |
3.3 | If the dividend payout in any given financial year to the Shareholders or to the holders of Series A CCPS (as defined in the SHA) or to the holders of Series B CCPS (as defined in the SHA) or to the holders of Series C CCPS (as defined in this SHA) of the Company, whichever is highest, is more than 5% (five per cent) of the amount invested for such securities by the holder of those securities, then the holders of the DEG CCDs will be entitled to an additional interest which shall be equal to the difference between (a) the percentage return (on the amount invested) received by the holders of such Equity Shares or the holders of Series A CCPS or the holders of Series B CCPS or to the holders of Series C CCPS; and (b) the rate of interest received by the holder of the DEG CCDs for that financial year under the terms of paragraph 3.1. |
3.4 |
For the purposes of calculation of interest, the issue price (i.e. par value and premium) of each DEG CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 50.27. The payment of interest shall, however, be |
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made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the interest is paid out by the Company. |
4. | Conversion |
4.1 | The DEG CCDs shall be convertible into Equity Shares of the Company at the option of the holders of the DEG CCDs in accordance with paragraph 4.2. Any DEG CCDs that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the Subscription Closing Date in relation to the DEG CCDs (the Maturity Date ), |
in each case, in accordance with this SHA. Upon occurrence of any of the event under paragraph 4.1 (i) and (ii) above the Company (and the Sponsors, where applicable) will immediately follow the procedure under paragraph 4.2 (iv) below.
4.2 | Optional Conversion |
The holders of the DEG CCDs shall have the right, in the events set out in paragraph 4.2 (ii) of this Schedule after the Subscription Closing Date of DEG CCDs to require the Company, by a written notice (the Conversion Notice ), to convert all or some of the DEG CCDs into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, IFC, Proparco, Helion and FC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice.
(i) | Conversion Ratio & Conversion Price |
(a) | The Conversion Ratio for the purposes of DEG CCDs shall be such that each DEG CCD will convert into such number of Equity Shares, so as to give the DEG CCD holders the DEG Required Return, without DEG being required to pay any amount for such conversion. |
For purposes of this paragraph, the term DEG Required Return for the purposes of the DEG CCDs shall mean (aa) 16% (sixteen percent) IRR; or (bb) 18.4% (Eighteen point four Percent) IRR, in the event of conversion of the DEG CCDs into Equity Shares of the Company (a) in accordance with paragraph 4.1 (i) of this Schedule H, or (b) upon Transfer of the Equity Securities in terms of Clause 6.3.4 of the SHA, or (c) upon a voluntary sale of any or all the Equity Securities held by all the Investors and the voluntary sale of Equity Securities held by the Sponsors to a third party, such that pursuant to the sale of the Equity Securities there is a change in Control on the Company, or (d) upon a Liquidation Event B other than upon Transfer of all or more than 70% (seventy percent) in value of the Companys Assets. For calculating the DEG Required Return, the
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return of 16% (sixteen percent) IRR or 18.4% (eighteen point four percent) IRR, as the case may be, shall be calculated from 11 th November 2011 till the date of the conversion of the DEG CCDs.
Provided that, if the DEG CCD holder receives any interest from the Company prior to conversion, the value of the same will be deducted from the DEG Required Return. Provided further that, any amounts (in INR terms) received by DEG from AZI as interest/coupon on the compulsorily convertible debentures that DEG held in AZI shall be deducted from the DEG Required Return taking into consideration the dates on which such amounts has been remitted by AZI to DEG.
For the calculation of the DEG Required Return, the aggregate investment amounts in DEG CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 50.27 to the DEG Investment Amount.
(b) | A valuation of the Company to enable conversion of the DEG CCDs in accordance with (a) above shall be: |
1) | for the events specified in paragraph 4.2 (ii) (a), (b) and (g) and paragraph 4.1(ii), the valuation as determined by one of the Big Four Accounting Firms selected in accordance with the procedure laid down in paragraph 4.2 (c) below; |
2) | for the events specified in paragraph 4.2(ii) (c), (d), (e) and (f), the valuation as offered by the third party purchaser; and |
3) | for the events specified in paragraph 4.3(i), the valuation per Equity Share (on a fully diluted basis after giving effect to the conversion of all Equity Securities that are convertible to Equity Shares, as provided in the SHA) shall be equal to the initial public offering price of Equity Shares offered for sale/issue of Equity Shares by the Company pursuant to the IPO or QIPO. |
(c) | DEG shall set out in the Conversion Notice, the names of 2 (two) of the Big Four Accounting Firms that are selected by DEG for the purpose of paragraph 4.2(i)(c). Within 10 (ten) days of the date of the Conversion Notice, IFC, Helion, FC, DEG, Proparco, Company and Sponsors shall jointly agree to appoint one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company, and shall jointly issue a notice to DEG in this respect. If DEG does not receive the aforesaid notice within the period of 10 days from the date of the Conversion Notice, then DEG shall have the right to select, in its sole discretion, one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion notice to do the valuation of the Company. |
(ii) | The holders of the DEG CCDs will be entitled to exercise their conversion right in respect of the DEG CCDs just prior to or on the occurrence of the following events: |
(a) | Liquidation Event A or Liquidation Event B as defined in the SHA. |
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(b) | Buy-back of the DEG CCDs in accordance with the terms of the SHA. |
(c) | In the event holder of the DEG CCDs wishes to exercise its Co-Sale Right under Clause 6.3.3 (Co -Sale Rights) of the SHA. |
(d) | In the event holder of the DEG CCDs wishes to exercise its Co-Sale Right under Clause 6.3.4 (Transfer to a Competitor) of the SHA. |
(e) | In the event holder of the DEG CCDs wishes to exercise its Drag Along Right under Clause 6.4 (Drag Right to the Investors) of the SHA. |
(f) | In the event holder of the DEG CCDs wishes to exercise its right under Clause 6.5 (Drag Right of DEG, IFC and Proparco) of the SHA. |
(g) | In the event holder of the DEG CCDs wishes to exercise the Deficit Call Option under Clause 6.6 (IFC, DEG and Proparco Call Option) of the SHA. |
(iii) | The conversion Notice shall be dated and shall set forth: |
(a) | The number of DEG CCDs in respect of which the holders of the DEG CCDs are exercising their right to conversion in accordance with this paragraph 4.2; |
(b) | The number of Equity Shares of the Company that the DEG CCDs shall convert into; and |
(c) | The names of 2 of the Big Four Accounting Firms that are selected by DEG for the purpose of paragraph 4.2(i)(c), if applicable; and the reference valuation as offered by the third party purchaser, if applicable. |
(iv) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company approve the following: |
| The conversion of such number of the DEG CCDs; |
| The cancellation of the certificates representing such number of DEG CCDs that are converted; |
| The issuance and allotment of such number of Equity Shares of the Company that the DEG CCDs shall convert into. |
in each case, as are mentioned in the Conversion Notice;
(b) |
Cancellation of the debenture certificates of DEG CCDs in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the DEG CCDs to |
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evidence such holders of the DEG CCDs as the owners of the Equity Shares issued upon conversion of such number of the DEG CCDs as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the DEG CCDs as the owners of the Equity Shares issued pursuant to the conversion of such number of the DEG CCDs as are mentioned in the Conversion Notice; and updating the register of debenture holders to indicate the conversion of the DEG CCDs into Equity Shares; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provision of this paragraph 4, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the DEG CCDs. |
4.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the DEG CCDs into Equity Shares based on the conversion price arrived in accordance with paragraph 4.2(i), if at any time after the Subscription Closing Date the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The DEG CCDs shall convert into Equity Shares of the Company immediately prior the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO or an IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the DEG CCDs into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | Within the Listing Date, (as defined in the SHA), the QIPO or the IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted to trading on a Relevant Market (as defined in the SHA) on or prior to the Listing Date. |
Then such conversion of Series DEG CCDs into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the SHA and shall undertake all necessary actions to ensure that the holders of the DEG CCDs are placed in the same position, and possess the same rights as set forth in this Schedule H, they had the benefit of immediately prior to the occurrence of the event set forth in (i) above.
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5. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries and in accordance with the terms of the SHA, the holders of the DEG CCDs shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of the SHA, the DEG CCDs shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in the SHA. Notwithstanding the above, the holders of the DEG CCDs will also be entitled to the buy-back preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by DEG pursuant to the conversion of the DEG CCDs shall be treated at par with the remaining Equity Shares of the Company for the purposes of this paragraph 5, save and except where the DEG CCDs are converted into Equity Shares of the Company on or immediately prior and only in connection with DEG exercising its right in the case of events set out in this paragraph 5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the DEG CCDs will be entitled to priority in terms of payment in the like manner as the DEG CCDs as set out in this paragraph 5.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of DEG CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 50.27 to the, DEG Investment Amount, However, to the extent relevant, at the time of payment of amounts to the holders of DEG CCDs in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
6. | Transferability |
Subject to the terms of the SHA, the DEG CCDs shall be freely transferable to any person and holders of the DEG CCDs may assign all or any of the DEG CCDs and any rights attaching thereto under the SHA, without the prior consent of any Person.
7. | Voting Rights |
From and after the issuance of the DEG CCDs, DEG shall only be entitled to exercise voting rights on every resolution in respect of Schedule M placed before the Company on the basis of its shareholding in the Company on an As if Converted Basis subject to the terms of the SHA. Provided however that upon the transfer of the DEG CCDs in accordance with the terms of the SHA, the transferee of the DEG CCDs will be entitled to vote on every resolution placed before the Company in proportion to the Equity Shares held by such transferee in the share capital of
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the Company, assuming the transferred DEG CCDs have been converted into Equity Shares of the Company on the basis of the conversion price as determined in paragraph 4.2(i) above.
From the date of conversion of the DEG CCDs, the voting percentage of all the shareholders in the Company shall be in proportion to their shareholding in the Company.
For the avoidance of doubt, it is hereby clarified, that DEG shall be entitled to exercise its voting rights as a debenture holder in the Company available to it under applicable Law.
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SCHEDULE I- TERMS AND CONDITIONS OF IFC II CCDS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Form and Status of IFC II CCDs |
Each IFC II CCD shall have the issue price of USD 36.85 (United States Dollars Thirty Six and Eighty Five Cents).
2. | Term |
Unless converted in accordance with the terms of this Schedule I, the Articles of the Company and applicable Laws, the terms of the IFC II CCDs shall be a maximum of 20 (twenty) years from their issuance. The date on which the IFC II CCDs were issued and allotted to IFC shall be referred as CCDs II Closing Date .
3. | Interest |
3.1 | IFC II CCDs shall not carry any annual interest; however, if any dividend payout is made in any given Financial Year to the Shareholders or the holders of any CCPS of the Company, whichever is higher, IFC II CCDs shall be entitled to interest/ dividend which shall be equal to the percentage return (on the amount invested) received by the holders of Equity Shares or the holders of such CCPS, as the case may be, for that financial year under the terms of the SHA. |
3.2 | For the purposes of calculation of interest, the issue price (i.e. par value and premium) of each IFC II CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 54.27. The payment of interest shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the interest is paid out by the Company. |
4. | Conversion |
4.1 | The IFC II CCDs shall be convertible into Equity Shares of the Company at the option of the holders of the IFC II CCDs in accordance with paragraph 4.2. Any IFC II CCDs that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the CCDs II Closing Date in relation to the IFC II CCDs (the Maturity Date ), |
in each case, in accordance with this SHA. Upon occurrence of any of the event under paragraph 4.1 (i) and (ii) above the Company (and the Sponsors, where applicable) will immediately follow the procedure under paragraph 4.2 (iv) below.
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4.2 | Optional Conversion |
The holders of the IFC II CCDs shall have the right, in the events set out in paragraph 4.2 (ii) of this Schedule I after the CCDs II Closing Date of IFC II CCDs to require the Company, by a written notice (the Conversion Notice ), to convert all or some of the IFC II CCDs into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, Proparco, DEG, Helion and FC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice.
(i) | Conversion Ratio & Conversion Price |
(a) | The Conversion Ratio for the purposes of IFC II CCDs shall be such that IFC II CCDs will convert into such number of Equity Shares, so as to give IFC II CCDs holders the IFC II Required Return, without IFC being required to pay any amount for such conversion. |
For purposes of this paragraph, the term IFC II Required Return for the purposes of the IFC II CCDs shall mean (aa) 16% (sixteen percent) IRR; or (bb) 18.4% (Eighteen point four Percent) IRR, in the event of conversion of the IFC II CCDs into Equity Shares of the Company (a) in accordance with paragraph 4.1 (i) of this Schedule I, or (b) upon Transfer of the Equity Securities in terms of Clause 6.3.4 of the SHA, or (c) upon a voluntary sale of any or all the Equity Securities held by all the Investors and the voluntary sale of Equity Securities held by the Sponsors to a third party, such that pursuant to the sale of the Equity Securities there is a change in Control on the Company, or (d) upon a Liquidation Event B other than upon Transfer of all or more than 70% (seventy percent) in value of the Companys Assets. For calculating the IFC II Required Return, the return of 16% (sixteen percent) IRR or 18.4% (eighteen point four percent) IRR, as the case may be, shall be calculated from 12 th December 2012 till the date of the conversion of the IFC II CCDs.
Provided that, if the IFC II CCDs holder receives any interest from the Company prior to conversion, the value of the same will be deducted from the IFC II Required Return.
For the calculation of the IFC II Required Return, the aggregate investment amounts in IFC II CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 54.27 to the IFC II CCDs Investment Amount.
(b) | A valuation of the Company to enable conversion of the IFC II CCDs in accordance with (a) above shall be: |
1) | for the events specified in paragraph 4.2 (ii) (a), (b) and (g) and paragraph 4.1(ii), the valuation as determined by one of the Big Four Accounting Firms selected in accordance with the procedure laid down in paragraph 4.2(i)(c) below; and |
2) | for the events specified in paragraph 4.2(ii) (c), (d), (e) and (f), the valuation as offered by the third party purchaser. |
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3) | for the events specified in paragraph 4.3(i), the valuation per Equity Share (on a fully diluted basis after giving effect to the conversion of all Equity Securities that are convertible to Equity Shares, as provided in the SHA) shall be equal to the initial public offering price of Equity Shares offered for sale/issue of Equity Shares by the Company pursuant to the IPO or QIPO. |
(c) | IFC shall set out in the Conversion Notice, the names of 2 (two) of the Big Four Accounting Firms that are selected by IFC for the purpose of paragraph 4.2(i)(c). Within 10 days of the date of the Conversion Notice, IFC, Helion, FC, DEG, Proparco, Company and Sponsors shall jointly agree to appoint one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company, and shall jointly issue a notice to IFC in this respect. If IFC do not receive the aforesaid notice within the period of 10 days from the date of the Conversion Notice, then IFC shall have the right to select, in its sole discretion, one of the 2 (two) Big Four Accounting firms mentioned in the Conversion notice to do the valuation of the Company. |
(ii) | The holders of the IFC II CCDs will be entitled to exercise their conversion right in respect of the IFC II CCDs just prior to or on the occurrence of the following events: |
(a) | Liquidation Event A or Liquidation Event B as defined in the SHA. |
(b) | Buy-back of the IFC II CCDs in accordance with the terms of the SHA a. |
(c) | In the event holder of the IFC II CCDs wishes to exercise its Co-Sale Right under Clause 6.3.3 (Co Sale Rights) of the SHA. |
(d) | In the event holder of the IFC II CCDs wishes to exercise its Co-Sale Right under Clause 6.3.4 (Transfer to a Competitor) of the SHA. |
(e) | In the event holder of the IFC II CCDs wishes to exercise its Drag Along Right under Clause 6.4 (Drag Right to the Investors) of the SHA. |
(f) | In the event holder of the IFC II CCDs wishes to exercise its right under Clause 6.5 (Drag Right of IFC, DEG and Proparco) of the SHA. |
(g) | In the event holder of the IFC II CCDs wishes to exercise the Deficit Call Option under Clause 6.6 (IFC, DEG and Proparco Call Option) of the SHA. |
(iii) | The conversion Notice shall be dated and shall set forth: |
(a) | The number of IFC II CCDs in respect of which the holders of the IFC II CCDs are exercising their right to conversion in accordance with this paragraph 4.2; |
(b) | The number of Equity Shares of the Company that the IFC II CCDs shall convert into; and |
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(c) | The names of 2 of the Big Four Accounting Firms that are selected by IFC for the purpose of paragraph 4.2(i)(c), if applicable; and the reference valuation as offered by the third party purchaser, if applicable. |
(iv) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company approve the following: |
| The conversion of such number of the IFC II CCDs; |
| The cancellation of the certificates representing such number of IFC II CCDs that are converted; |
| The issuance and allotment of such number of Equity Shares of the Company that the IFC II CCDs shall convert into. |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the debenture certificates of IFC II CCDs in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the IFC II CCDs to evidence such holders of the IFC II CCDs as the owners of the Equity Shares issued upon conversion of such number of the IFC II CCDs as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the IFC II CCDs as the owners of the Equity Shares issued pursuant to the conversion of such number of the IFC II CCDs as are mentioned in the Conversion Notice; and updating the register of debenture holders to indicate the conversion of the IFC II CCDs into Equity Shares; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provision of this paragraph 4, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the IFC II CCDs. |
4.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the IFC II CCDs into Equity Shares based on the conversion price arrived in accordance with paragraph 4.2(i), if at any time after the CCDs II Closing Date, the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The IFC II CCDs shall convert into Equity Shares of the Company immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
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(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO or an IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the IFC II CCDs into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | The QIPO or the IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market (as defined in the SHA) on or prior to of the Listing Date. |
Then such conversion of IFC II CCDs into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the SHA and shall undertake all necessary actions to ensure that the holders of the IFC II CCDs are placed in the same position, and possess the same rights as set forth in this Schedule I, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
5. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries (as defined in the SHA) and in accordance with the terms of the SHA, the holders of the IFC II CCDs shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of the SHA, the IFC II CCDs shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in the SHA. Notwithstanding the above, the holders of the IFC II CCDs will also be entitled to the buy-back preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by IFC pursuant to the conversion of the IFC II CCDs shall be treated at par with the remaining Equity Shares of the Company for the purposes of this paragraph 5, save and except where the IFC II CCDs are converted into Equity Shares of the Company on or immediately prior and only in connection with IFC exercising its right in the case of events set out in this paragraph 5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the IFC II CCDs will be entitled to priority in terms of payment in the like manner as the IFC II CCDs as set out in this paragraph 5.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of IFC II CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 54.27 to the IFC II CCDs Investment Amount. However, to the extent relevant, at the time of payment of amounts to the holders of IFC II CCDs in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD
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amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
6. | Transferability |
Subject to the terms of the SHA, the IFC II CCDs shall be freely transferable to any person and holders of the IFC II CCDs may assign all or any IFC II CCDs and any rights attaching thereto under the SHA, without the prior consent of any Person.
7. | Voting Rights |
From and after the issuance of the IFC II CCDs, IFC shall only be entitled to exercise voting rights on every resolution in respect of Schedule M placed before the Company on the basis of its shareholding in the Company on an As if Converted Basis subject to the terms of the SHA. Provided however that upon the transfer of the IFC II CCDs in accordance with the terms of the SHA, the transferee of the IFC II CCDs will be entitled to vote on every resolution placed before the Company in proportion to the Equity Shares held by such transferee in the share capital of the Company, assuming the transferred IFC II CCDs have been converted into Equity Shares of the Company on the basis of the conversion price as determined in paragraph 4.2(i) above.
From the date of conversion of the IFC II CCDs, the voting percentage of all the shareholders in the Company shall be in proportion to their shareholding in the Company.
For the avoidance of doubt, it is hereby clarified, that IFC shall be entitled to exercise its voting rights as a debenture holder in the Company available to it under applicable Law.
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SCHEDULE J- TERMS AND CONDITIONS OF SERIES E CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series E CCPS shall have the issue price of USD 64.71 (United States Dollars Sixty Four and Seventy One Cents).
2. | Term |
Unless converted in accordance with the terms of this Schedule J, the Articles of the Company and applicable Laws, the term of the Series E CCPS shall be a maximum of 20 (twenty) years from their issuance.
3. | Dividend |
3.1 | Each of the holders of Series E CCPS shall be entitled to payment of 5% (five percent) non-cumulative dividend per annum (calculated on the issue price) on each of the Series E CCPS by way of dividend from the Company in accordance with applicable Law as and when the Board of the Company declares any dividend to any shareholder. |
3.2 | If the dividend payout in any given financial year to the Shareholders or to the holders of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS or Series H CCPS of the Company, whichever is highest, is more than 5% (five percent) of the amount invested for such securities by the holder of those securities, then the holders of the Series E CCPS will be entitled to an additional dividend which shall be equal to the difference between (a) the percentage return (on the amount invested) received by the holders of such Equity Shares or the holders of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS or Series H CCPS and (b) the rate of dividend received by the holder of the Series E CCPS for that Financial Year under the paragraph 3.1 above. It is clarified that in case the Company declares dividends to the holders of Equity Shares, Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and/or Series H CCPS, the holders of Series E CCPS shall be entitled to receive dividends simultaneous with the holders of Equity Shares, Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and/or Series H CCPS in the manner set out above. |
3.3 | For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series E CCPS shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 54.24. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USDINR- conversion as on the date on which the dividend is paid out by the Company. |
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4. | Conversion |
4.1 | The Series E CCPS shall be convertible into Equity Shares of the Company at the option of the holders of the Series E CCPS in accordance with paragraph 4.2. Any Series E CCPS that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the date of the issuance of the Series E CCPS (the Maturity Date ), |
in each case, in accordance with this SHA. Upon occurrence of any of the event under paragraph 4.1 (i) and (ii) above the Company (and the Sponsors, where applicable) will immediately follow the procedure under paragraph 4.2 (iv) below.
4.2 | Optional Conversion |
The holders of the Series E CCPS shall have the right, in the events set out in paragraph 4.2 (ii) of this Schedule J after the Proparco Closing Date to require the Company, by a written notice (the Conversion Notice ), to convert all or some of the Series E CCPS into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, GIF, IFC Helion, DEG and FC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice.
(i) | Conversion Ratio & Conversion Price |
(a) | The Conversion Ratio for the purposes of Series E CCPS shall be such that each Series E CCPS will convert into such number of Equity Shares, so as to give the Series E CCPS holders the Proparco Required Return -1, without Proparco being required to pay any amount for such conversion. |
For purposes of this paragraph, the term Proparco Required Return -1 for the purposes of the Series E CCPS shall mean (aa) 15% (fifteen) IRR; or (bb) 18.4% (eighteen point four percent) IRR, in the event of conversion of the Series E CCPS into Equity Shares of the Company (a) in accordance with paragraph 4.1 (i) of this Schedule J, or (b) upon Transfer of the Equity Securities in terms of Clause 6.3.4 of the SHA, or (c) upon a voluntary sale of any or all the Equity Securities held by all the Investors and the voluntary sale of Equity Securities held by the Sponsors to a third party, such that pursuant to the sale of the Equity Securities there is a change in Control on the Company, or (d) upon a Liquidation Event B other than upon Transfer of all or more than 70% (seventy percent) in value of the Companys Assets. For calculating the Proparco Required Return - 1, the return of 15% IRR or 18.4% (eighteen point four percent) IRR, as the case may be, shall be calculated from 13 th May 2013 till the date of the conversion of the Series E CCPS. Provided however that, if Proparco does not subscribe and pay for Series G CCPS as contemplated in the
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Proparco Subscription Agreement-2, the above mentioned rate of 18.4% (eighteen point four percent) shall be replaced by 17% (seventeen percent).
Provided further that, if the Series E CCPS holder receives any dividend from the Company prior to conversion, the amount of dividends received by the holders of Series E CCPS will be deducted from the Proparco Required Return-1. It is clarified that the amount of dividends for the purposes of preceding sentence shall be considered net of Taxes, i.e. after deducting any Taxes deducted or paid on such dividends by the Company.
(b) | A valuation of the Company to enable conversion of the Series E CCPS in accordance with (a) above shall be: |
1) | for the events specified in paragraph 4.2 (ii) (a), (b) and (g) and paragraph 4.1(ii), the valuation as determined by one of the Big Four Accounting Firms selected in accordance with the procedure laid down in paragraph 4.2(i)(c) below; |
2) | for the events specified in paragraph 4.2(ii) (c), (d), (e) and (f), the valuation as offered by the third party purchaser; and |
3) | for the events specified in paragraph 4.3(i), the valuation per Equity Share (on a fully diluted basis after giving effect to the conversion of all Equity Securities that are convertible to Equity Shares, as provided in the SHA) shall be equal to the initial public offering price of Equity Shares offered for sale/issue of Equity Shares by the Company pursuant to the IPO or QIPO. |
(c) | Proparco shall set out in the Conversion Notice, the names of 2 (two) of the Big Four Accounting Firms that are selected by Proparco for the purpose of paragraph 4.2(i)(b)(l). Within 10 days of the date of the Conversion Notice, GIF, IFC, Helion, FC, DEG, Company and Sponsors shall jointly agree to appoint one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company, and shall jointly issue a notice to Proparco in this respect. If Proparco does not receive the aforesaid notice within the period of 10 days from the date of the Conversion Notice, then Proparco shall have the right to select, in its sole discretion, one of the 2 (two) Big Four Accounting firms mentioned in the Conversion notice to do the valuation of the Company. |
(ii) | The holders of the Series E CCPS will be entitled to exercise their conversion right in respect of the Series E CCPS just prior to or on the occurrence of the following events: |
(a) | Liquidation Event A or Liquidation Event B as defined in the SHA. |
(b) | Buy-back of the Series E CCPS in accordance with the terms of the SHA. |
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(c) | In the event holder of the Series E CCPS wishes to exercise its Co-Sale Right under Clause 6.3.3 (Co Sale Rights) of the SHA. |
(d) | In the event holder of the Series E CCPS wishes to exercise its Co-Sale Right under Clause 6.3.4 (Transfer to a Competitor) of the SHA. |
(e) | In the event holder of the Series E CCPS wishes to exercise its Drag Along Right under Clause 6.4 (Drag Right to the Investors) of the SHA. |
(f) | In the event holder of the Series E CCPS wishes to exercise its right under Clause 6.5 (Drag Right of IFC, DEG and Proparco) of the SHA. |
(g) | In the event holder of the Series E CCPS wishes to exercise the Deficit Call Option under Clause 6.6 (IFC, DEG and Proparco Call Option) of the SHA. |
(iii) | The conversion Notice shall be dated and shall set forth: |
(a) | The number of Series E CCPS in respect of which the holders of the Series E CCPS are exercising their right to conversion in accordance with this paragraph 4.2; |
(b) | The number of Equity Shares of the Company that the Series E CCPS shall convert into; and |
(c) | The names of 2 of the Big Four Accounting Firms that are selected by Proparco for the purpose of paragraph 4.2(i)(c), if applicable; and the reference valuation as offered by the third party purchaser, if applicable. |
(iv) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company approve the following: |
| The conversion of such number of the Series E CCPS; |
| The cancellation of the certificates representing such number of Series E CCPS that are converted; |
| The issuance and allotment of such number of Equity Shares of the Company that the Series E CCPS shall convert into. |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of Series E CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the Series E CCPS to evidence such holders of the Series E CCPS as the owners of the Equity Shares |
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issued upon conversion of such number of the Series E CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series E CCPS as the owners of the Equity Shares issued pursuant to the conversion of such number of the Series E CCPS as are mentioned in the Conversion Notice; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provision of this paragraph 4, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series E CCPS. |
4.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series E CCPS into Equity Shares based on the conversion price arrived in accordance with paragraph 4.2(i), if at any time after the Proparco Closing Date the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series E CCPS shall convert into Equity Shares of the Company immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO or an IPO and in connection with such filing, such Authority or Relevant Market requires the conversion of the Series E CCPS into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | The QIPO or the IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market (as defined in the SHA) on or prior to the Listing Date. |
Then such conversion of Series E CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the SHA and shall undertake all necessary actions to ensure that the holders of the Series E CCPS are placed in the same position, and possess the same rights as set forth in this Schedule J, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
5. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries (as defined in the SHA) and in accordance with the terms of the SHA, the holders of the Series E CCPS shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
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Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of the SHA, the Series E CCPS shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in the SHA. Notwithstanding the above, the holders of the Series E CCPS will also be entitled to the buy-back preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by Proparco pursuant to the conversion of the Series E CCPS shall be treated at par with the remaining Equity Shares of the Company for the purposes of this paragraph 5, save and except where the Series E CCPS are converted into Equity Shares of the Company on or immediately prior and only in connection with Proparco exercising its right in the case of events set out in this paragraph 5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Series E CCPS will be entitled to priority in terms of payment in the like manner as the Series E CCPS as set out in this paragraph 5.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco) of the SHA, the calculation of entitled amounts of the holders of Series E CCPS shall be considered in INR terms by applying the USD-INR conversion of USD 1 = INR 54.24 to the Proparco Investment Amount- 1. However, to the extent relevant, at the time of payment of amounts to the holders of Series E CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
6. | Transferability |
Subject to the terms of the SHA, the Series E CCPS shall be freely transferable to any person and holders of the Series E CCPS may assign all or any of the Series E CCPS and any rights attaching thereto under the Transaction Documents, without the prior consent of any Person.
7. | Voting Rights |
From and after the issuance of the Series E CCPS, Proparco shall only be entitled to exercise voting rights on every resolution in respect of Schedule M placed before the Company on the basis of its shareholding in the Company on an As if Converted Basis subject to the terms of the SHA. Provided however that upon the transfer of the Series E CCPS in accordance with the terms of the SHA, the transferee of the Series E CCPS will be entitled to vote on every resolution placed before the Company in proportion to the Equity Shares held by such transferee in the share capital of the Company, assuming the transferred Series E CCPS have been converted into Equity Shares of the Company on the basis of the conversion price as determined in paragraph 4.2(i) above.
From the date of conversion of the Series E CCPS, the voting percentage of all the shareholders in the Company shall be in proportion to their shareholding in the Company.
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SCHEDULE K IFC POLICY COVENANTS
1. | DEFINITIONS: |
1.1 | The definitions used in Clause 1 of this Agreement shall apply to this Schedule. |
1.2 | For the purposes of this Schedule, the following terms (which have not been defined in Clause 1 of this Agreement) shall have the following meanings: |
Action Plan means the plan or plans developed by the Company or its Subsidiaries, a sample copy of which is attached as Annex B to this Schedule ( Action Plan ), setting out the specific social and environmental measures to be undertaken by the Company, to enable the Companys Operations to be constructed, equipped and operated in compliance with the Performance Standards;
Annual Monitoring Report the annual monitoring report to be submitted to IFC within 90 days after the end of each Financial Year, in the form and substance acceptable to IFC, setting out the specific social, environmental and developmental impact information to be provided by the Company in respect of its Operations, as such form of Annual Monitoring Report may be amended or supplemented from time to time with IFCs consent;
Applicable S&E Law means all applicable statutes, laws, ordinances, rules and regulations of Mauritius or India (as the case may be), including, without limitation, any license, permit or other governmental Authorization setting standards concerning environmental, social, labour, health and safety or security risks of the type contemplated by the Performance Standards or imposing liability for the breach thereof;
CAO means the Compliance Advisor Ombudsman, the independent accountability mechanism for IFC that responds to environmental and social concerns of affected communities and aims to enhance outcomes;
Material Adverse Effect means a material adverse effect on:
(a) | the Companys or any of its Subsidiaries Assets or properties; |
(b) | the Companys or any of its Subsidiaries business prospects or financial condition; |
(c) | the carrying on of the Companys or any of its Subsidiaries business or operations; or |
(d) | the ability of the Company to comply, and ensure that each of its Subsidiaries complies, with its obligations under this Agreement, any other Transaction Document to which it is a party or the Companys and in the case of each of its Subsidiaries, such Subsidiarys Memorandum and Articles of the Company; |
(e) | the ability of the Sponsors to comply with its obligations under this Agreement or any other Transaction Documents to which it is a party; |
Operations the operations, activities and facilities of the Company and its Subsidiaries (including the design, construction, operation, maintenance, management and monitoring
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thereof) as applicable in Mauritius or India, as the case may be;
MW means mega-watts;
Performance Standards means IFCs Performance Standards on Social & Environmental Sustainability, dated January 1, 2012, copies of which have been delivered to and receipt of which has been acknowledged by the Company pursuant to the letter dated, June 5, 2015;
Related Party means any Person: (a) that holds a material interest in the Company or any Subsidiary; (b) in which the Company or any Subsidiary holds a material interest; (c) that is otherwise an Affiliate of the Company; (d) who serves (or has within the past twelve (12) months served) as a director, officer or employee of the Company; or (e) who is a member of the family of any individual included in any of the foregoing. For the purpose of this definition, material interest shall mean a direct or indirect ownership of shares representing at least 1% (one percent) of the outstanding voting power or equity of the Company or any Subsidiary;
Relevant Parties means the Company, the Sponsors, and each of the other Shareholders of the Company that agrees to become a party to this Agreement pursuant to a Deed of Adherence;
S&EA means the social and environmental assessment prepared by the Company or its Subsidiaries in accordance with the Performance Standards and the Action Plan including but not limited to: audit report on the status of compliance of the existing (and under construction) solar power plant with IFC Performance Standards; social and environmental impact assessments including a Social and Environmental Management Plan (SEMP) and community engagement plan, which is consistent with IFC Performance Standards; and social and environmental impact assessment and mitigation plans developed as per the requirements of the S&E Management System;
S&E Management System means the Companys social and environmental management system, including but not limited to corporate-wide applicable S&E Management System acceptable to IFC, which includes all the elements discussed in the ESRS and is consistent with the Performance Standards, and the HR Policies and Procedures, both to be implemented in accordance with the schedule detailed in the Action Plan and enabling the Company to identify, asses and manage risks in respect of its Operations on an ongoing basis and in accordance with the Performance Standards;
Sanctionable Practice means any Corrupt Practice, Fraudulent Practice, Coercive Practice, Collusive Practice, or Obstructive Practice, as those terms are interpreted in accordance with the Anti-Corruption Guidelines attached to this Agreement as Annex A to this Schedule ( Anti-Corruption Guidelines for IFC Transactions );
2. | REPORTING COVENANTS |
2.1 | The Company shall promptly notify IFC upon becoming aware of any: (i) litigation or investigations or proceedings which have or may reasonably be expected to have a Material Adverse Effect; or (ii) any criminal investigations or proceedings against the Company or any Related Party, and any such notification shall specify the nature of the action or proceeding and any steps that the Company proposes to take in response to the same. |
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2.2 | Upon IFCs request, and with reasonable prior notice to the Company, the Company shall permit representatives of IFC and the CAO, during normal office hours, to: |
(a) | visit any of the sites and premises where the business of the Company or its Subsidiaries is conducted; |
(b) | inspect any of the sites, facilities, plants and equipment of the Company or its Subsidiaries; |
(c) | have access to the books of account and all records of the Company and its Subsidiaries; and |
(d) | have access to those employees, agents, contractors and subcontractors of the Company and its Subsidiaries who have or may have knowledge of matters with respect to which IFC or the CAO seeks information; |
provided that: (A) no such reasonable prior notice shall be necessary if special circumstances so require; and (B) in the case of the CAO, such access shall be for the purpose of carrying out the CAOs Role.
2.3 | The Company shall and shall ensure that each of its Subsidiaries shall: |
(a) | within 90 (ninety) days after the end of each Financial Year, deliver to IFC, the Annual Monitoring Report consistent with the requirements of this Agreement confirming compliance with the Action Plan, the social and environmental covenants of this Agreement and Applicable S&E Law or, as the case may be, identifying any non-compliance or failure, and the actions being taken to remedy any such deficiency; |
(b) | within 3 (three) days after its occurrence, notify IFC of any social, labour, health and safety, security or environmental incident, accident or circumstance having, or which could reasonably be expected to have, any material adverse social and/or environmental impact or any material adverse impact on the implementation or operation of the Operations in compliance with the Performance Standards, specifying in each case the nature of the incident, accident, or circumstance and the impact or effect arising or likely to arise therefrom, and the measures the Company or the relevant Subsidiary, as applicable, is taking or plans to take to address them and to prevent any future similar event; and keep IFC informed of the on-going implementation of those measures. |
3. | OTHER COVENANTS |
3.1 | The following covenants will continue to apply in the manner set out below till the time IFC holds Equity Securities or any other financial interest in the Company. |
(a) | Sanctionable Practices: |
(i) | Each of the Relevant Parties hereby agrees that it shall not engage in (nor authorize or permit any Affiliate or any other Person acting on its behalf to engage in) any Sanctionable Practice with respect to any shareholding in the Company or any Operations; |
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(ii) | Each of the Relevant Parties further covenants that should it become aware of any violation of paragraph 3.1(a)(i), it shall promptly notify IFC; and |
(iii) | If IFC notifies the Company and/or any other Relevant Party of its concern that there has been a violation of paragraph 3.1(a)(i), the Company and any other such Relevant Party shall cooperate in good faith with IFC and its representatives in determining whether such a violation has occurred, and shall respond promptly and in reasonable detail to any notice from IFC, and shall furnish documentary support for such response upon IFCs request. |
(b) | Affirmative Environmental Covenants: The Company shall and shall ensure that each of its Subsidiaries shall: |
(i) | implement the Action Plan and undertake the Operations in compliance with the Applicable S&E Law, Performance Standards and Applicable S&E Law; and |
(ii) | appoint and maintain in a position of responsibility, an appropriately qualified and experienced S&E Management System manager for oversight of management of S&E Management System aspects across all of the Operations (including its Subsidiaries) and to ensure consistent application of the S&E Management System; |
(iii) | ensure implementation of the mitigation and management plans developed based on the outcome of the S&EA; |
(iv) | ensure the implementation and continuing operation of the S&E Management System; |
(v) | not undertake or invest in any Person engaged in any of the prohibited activities listed in Annex C to this Schedule. |
(vi) | periodically review the form of the Annual Monitoring Report and advise IFC as to whether revision of the form is necessary or appropriate in light of changes to the Operations and revise the form of the S&E Performance Report, if applicable, with the prior written consent of IFC. |
(c) | Negative Environmental Covenant: The Company shall not amend the Action Plan in any material respect without the prior written consent of IFC. |
(d) | UN Security Council Resolutions: The Company shall not and shall ensure that each of its Subsidiaries shall not enter into any transaction or engage in any activity prohibited by any resolution of the United Nations Security Council under Chapter VII of the United Nations Charter. |
(e) | Shell Banks: The Company shall not and shall ensure that each of its Subsidiaries shall not conduct business or enter into any transaction with, or transmit any funds through, |
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a Shell Bank.
(f) | Insurance : The Company shall, at all times, maintain a directors and officers liability insurance policy to IFC Nominee Director, providing adequate and customary coverage with a financially sound and reputable insurer or insurers. |
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ANNEX A TO SCHEDULE K
ANTI-CORRUPTION GUIDELINES FOR IFC TRANSACTIONS
The purpose of these Guidelines is to clarify the meaning of the terms Corrupt Practice, Fraudulent Practice, Coercive Practice, Collusive Practice and Obstructive Practice in the context of IFC operations.
1. | Corrupt Practices |
A Corrupt Practice is the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party.
Interpretation
A. | Corrupt practices are understood as kickbacks and bribery. The conduct in question must involve the use of improper means (such as bribery) to violate or derogate a duty owed by the recipient in order for the payer to obtain an undue advantage or to avoid an obligation. Antitrust, securities and other violations of law that are not of this nature are excluded from the definition of corrupt practices. |
B. | It is acknowledged that foreign investment agreements, concessions and other types of contracts commonly require investors to make contributions for bona fide social development purposes or to provide funding for infrastructure unrelated to the project. Similarly, investors are often required or expected to make contributions to bona fide local charities. These practices are not viewed as Corrupt Practices for purposes of these definitions, so long as they are permitted under local law and fully disclosed in the payers books and records. Similarly, an investor will not be held liable for corrupt or fraudulent practices committed by entities that administer bona fide social development funds or charitable contributions. |
C. | In the context of conduct between private parties, the offering, giving, receiving or soliciting of corporate hospitality and gifts that are customary by internationally-accepted industry standards shall not constitute corrupt practices unless the action violates applicable Law. |
D. | Payment by private sector persons of the reasonable travel and entertainment expenses of public officials that are consistent with existing practice under relevant law and international conventions will not be viewed as Corrupt Practices. |
E. | The World Bank Group 1 does not condone facilitation payments. For the purposes of implementation, the interpretation of Corrupt Practices relating to facilitation payments will take into account relevant law and international conventions pertaining to corruption. |
1 | The World Bank is the International Bank for Reconstruction and Development, an international organization established by Articles of Agreement among its member countries and the World Bank Group refers to the International Bank for Reconstruction and Development, the International Development |
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2. | Fraudulent Practices |
A Fraudulent Practice is any action or omission, including a misrepresentation that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.
Interpretation
A. | An action, omission, or misrepresentation will be regarded as made recklessly if it is made with reckless indifference as to whether it is true or false. Mere inaccuracy in such information, committed through simple negligence, is not enough to constitute a Fraudulent Practice for purposes of this Agreement. |
B. | Fraudulent Practices are intended to cover actions or omissions that are directed to or against a World Bank Group entity. It also covers Fraudulent Practices directed to or against a World Bank Group member country in connection with the award or implementation of a government contract or concession in a project financed by the World Bank Group. Frauds on other third parties are not condoned but are not specifically sanctioned in IFC, MIGA, or PRG operations. Similarly, other illegal behaviour is not condoned, but will not be considered as a Fraudulent Practice for purposes of this Agreement. |
3. | Coercive Practices |
A Coercive Practice is impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party.
Interpretation
A. | Coercive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice. |
B. | Coercive Practices are threatened or actual illegal actions such as personal injury or abduction, damage to property, or injury to legally recognizable interests, in order to obtain an undue advantage or to avoid an obligation. It is not intended to cover hard bargaining, the exercise of legal or contractual remedies or litigation. |
4. | Collusive Practices |
A Collusive Practice is an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party.
Interpretation
Collusive Practices are actions undertaken for the purpose of bid rigging or in connection with public procurement or government contracting or in furtherance of a Corrupt Practice or a Fraudulent Practice.
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5. | Obstructive Practices |
An Obstructive Practice is (i) deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making of false statements to investigators, in order to materially impede a World Bank Group investigation into allegations of a corrupt, fraudulent, coercive or collusive practice, and/or threatening, harassing or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation, or (ii) an act intended to materially impede the exercise of IFCs access to contractually required information in connection with a World Bank Group investigation into allegations of a corrupt, fraudulent, coercive or collusive practice.
Interpretation
Any action legally or otherwise properly taken by a party to maintain or preserve its regulatory, legal or constitutional rights such as the attorney-client privilege, regardless of whether such action had the effect of impeding an investigation, does not constitute an Obstructive Practice.
General Interpretation
A person should not be liable for actions taken by unrelated third parties unless the first party participated in the prohibited act in question.
It is hereby understood and agreed that the rules of interpretation in Schedule K shall not be applicable with respect to the Companys and Sponsors obligations to Proparco.
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ANNEX B TO SCHEDULE K
ACTION PLAN
# |
Action |
Completion date |
||||
1. | - | The Company will implement a corporate-wide applicable S&E Management System acceptable to IFC, which includes all the elements discussed in the Environmental and Social Review Summary and which is consistent with IFCs Performance Standards. This ESMS will be implemented across all its projects |
Ongoing |
|||
- | Complete full documentation of the above mentioned S&E Management System both a corporate and individual project level, which is acceptable to IFC. | |||||
- | Full Implementation of the S&E Management System in Azure Power projects and operations. | |||||
2. |
The Company will appoint an appropriately qualified and experienced S&E Management System manager for oversight of management of S&E Management System aspects across all of the Companys operations (including its subsidiary companies) and to ensure consistent application of the S&E Management System. |
Ongoing |
||||
3. |
- |
The Company will update and ensure full implementation of its HR Policies and Procedures Manual, which is consistent with IFCs Performance Standard 2 (PS2), 2012. |
Ongoing |
|||
4. |
Where relevant and applicable (and as assessed in the ESIA) agree with the affected communities in all the projects, measures for mitigation of impact in accordance with IFC Performance Standard 5. |
Ongoing and as applicable |
||||
5. |
Implement procedures at all its under-construction and operating projects to ensure: (a) construction contractors are in full compliance with applicable labour laws; (b) occupational health and safety status at the site conforms to good international industry practices; (c) appropriate facilities and amenities are provided to construction workers at the project site; and (d) appropriate amenities and facilities are provided to workers residing in labour camps. |
Ongoing and as applicable |
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# |
Action |
Completion date |
||
6. | The Company will provide to IFC information and audit report on the status of compliance of the existing (and under construction) solar power plant with IFC Performance Standards. | Ongoing | ||
7. | Complete and make available to IFC for review, a Social and Environmental Assessment (SEA) including a Social and Environmental Management Plan (SEMP) and community engagement plan, which is consistent with IFC Performance Standard for all its planned projects. | Ongoing and as applicable |
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ANNEX C TO SCHEDULE K
PROHIBITED ACTIVITIES
| Production or activities involving harmful or exploitative forms of forced labour 2 /harmful child labour. 3 |
| Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements. |
| Production or trade in weapons and munitions. 4 |
| Production or trade in alcoholic beverages (excluding beer and wine). |
| Production or trade in tobacco |
| Gambling, casinos and equivalent enterprises. |
| Trade in wildlife or wildlife products regulated under Convention on International Trade in Endangered Species of Wild Fauna and Flora. |
| Production or trade in radioactive materials. 5 |
| Production or trade in or use of unbonded asbestos fibres. 6 |
2 | Forced labor means all work or service, not voluntarily performed, that is extracted from an individual under threat of force or penalty. |
3 | Harmful child labor means the employment of children that is economical exploitive, or is likely to be hazardous to, or to interfere with, the childs education, or to be harmful to the childs health, or physical, mental, spiritual, moral, or social development. |
4 | These activities are prohibited only if a Portfolio Company is substantially involved in such activities, i.e. the activity is not considered ancillary to such portfolio Companys primary operations. |
5 | This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment where IFC considers the radioactive source to be trivial and/or adequately shielded. |
6 | This does not apply to the purchase and use of bonded asbestos cement sheeting where the asbestos content is <20%. |
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SCHEDULE L INVESTORS CONSENT RIGHTS
Certain corporate actions by the Company or any of its Subsidiaries, including AZI shall require
the consent of all Investors, including:
1) | amendment to the Memorandum and Articles of the Company or any Subsidiary in: (a) in any material manner; or (b) in any way which may alter or change the rights, privileges or preferences of the Equity Securities held by the Investors; |
2) | change in the designations, powers, rights, preferences or privileges, or the qualifications, limitations or restrictions on Equity Securities held by the Investors; |
3) | creation, authorization or issuance of any Equity Shares in the capital of the Company, or Share Equivalents in the Company whether having a structural or legal preference over, or ranking pari passu with, the Equity Securities held by the Investors; |
4) | authorize or undertake any arrangement for the disposal of any shares of any Subsidiary that results in the Company owning (directly or indirectly) less than 100% (one hundred per cent) of any Subsidiary; |
5) | any amalgamation, merger, consolidation, reconstitution, restructuring or similar transaction that results in a change in control of the Company or any Subsidiary; |
6) | any sale or disposal of Assets for a cumulative amount of USD 5,000,000 (United States Dollar Five Million) or more within a consecutive period of 12 (twelve) months (other than pursuant to charge(s) on Assets created for securing borrowing(s) approved by Majority Investors under paragraph 9 of Schedule M of the Agreement); |
7) | any sale or disposal of Assets of value more than USD 5,000,000 (United States Dollar Five Million) (other than pursuant to charge(s) on Assets created for securing borrowing(s) approved by Majority Investors under paragraph 9 of Schedule M of the Agreement); |
8) | authorize or undertake any Liquidation Event A or Liquidation Event B with respect to the Company or any of its Subsidiaries; |
9) | authorize or undertake any listing, including a QIPO, any delisting of the Equity Securities of the Company or any Subsidiary, or creating any new Subsidiary; |
10) | authorize or undertake any reduction of capital or share repurchase, other than any buyback by the Company under Clauses 9 and 9 A of the SHA, repurchase of Equity Securities issued to or held by Employees, officers, directors or consultants of the Company or its Subsidiaries pursuant to an employee stock plan approved by the Board of the Company; |
11) | any change to the Business or to the business of Company or any of its Subsidiaries; |
12) | any change in the number of Directors of the Board other than as provided in this Agreement or any change to the committees of the Board, other than as provided in this Agreement; |
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13) | giving of any guarantee or comfort letter by the Company or any Subsidiary to any Person that is not in relation to securing project finance, working capital limits or non fund based facilities availed for solar power projects of the Company or any Subsidiary; |
14) | declaring any dividend or making any other distribution to Shareholders other than as provided in this Agreement; |
15) | entry into, amendment or termination of any agreement or commitment which imposes or is likely to impose obligations on the Company or its Subsidiary to make payments or otherwise incur liabilities exceeding the budget approved by the Board except automatic authorization to the CEO in accordance with point 1 under Schedule M; |
16) | Transfer of the Equity Securities held by any Shareholder, otherwise than in the manner permitted by the Transaction Documents; |
17) | appointment or removal of the statutory auditors or internal auditors of the Company or AZI; |
18) | amendments to any ESOP plan approved by the Company in accordance with the terms of this Agreement; |
19) | changes to accounting or tax compliance policies or practices; |
20) | constituting a committee of the Board or delegation of the powers of the Board to any committee or sub-Committee; |
21) | incurring any single item of capital expenditure (including acquiring a business or asset) greater than INR 10,000,000 (Indian Rupees Ten Million); |
22) | any change, amendment, modification or waiver of the terms of the AZI Shareholders Agreement; |
23) | Authorizing, undertaking, creating, approving or effecting any changes in the share capital of AZI by any means, including whether by issue, transfer, re-organization, reduction, buy-back, disposal or change in terms and privileges of equity shares or any equity securities issued by AZI; and |
24) | any commitment or agreement or delegation of powers to do any of the foregoing. |
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SCHEDULE M MAJORITY INVESTOR CONSENT RIGHTS
The following corporate actions of the Company or any of its Subsidiaries, including AZI shall
require the consent of Majority Investors and/or Super-Majority Investors, as applicable:
1) | approving or amending of the Annual Business Plan and Budget with automatic authorization to the CEO to exceed expenditure by a maximum of 10% (ten per cent); |
2) | establishment of a new power plant or entering into a new power purchase agreement or amendment to any existing power purchase agreement entered into by the Company or its Subsidiaries, except where the amendment has no material implications, including on tariff, termination, security package such as, but not limited to, letter of consent/default escrow agreements, parties and duration of the power purchase agreement, other than where such establishment of new power plant or entering into a new power purchase agreement or amendment to any existing power purchase agreement has already been covered under the approved Annual Business Plan of the Company or its Subsidiaries, as the case may be; |
3) | redeeming or buying back shares upon termination of a restricted stock purchase agreement of an officer, Employee or Director or consultant and buying back unvested shares held by the Sponsors and Employees of the Company; |
4) | appointment or removal and determination of the terms of employment (including remuneration) of Key Managerial Personnel; |
5) | giving any loans to the Key Managerial Personnel and Directors; |
6) | giving of any guarantee or comfort letter by the Company or any Subsidiary to any Person that is in relation to securing project finance, working capital limits or non-fund based facilities availed for solar power projects of the Company or any Subsidiary; |
7) | approval or any employee or consultant stock option; |
8) | changes in the Financial Year for preparation of audited accounts; |
9) | borrowing in excess of INR 5,000,000 (Indian Rupees Five Million) and/or creating any charge on Assets for securing such borrowings; |
10) | any sale of all or substantially all the IP Rights of the Company or its Subsidiary; |
11) | entering into or varying any material contracts; |
12) | changing the status of the Company or its Subsidiaries from a private company to a public company or vice a versa, as applicable; and |
13) | entering into any agreement, arrangement or transaction with any Shareholder or Director or Sponsors and/or their Affiliates, other than non-material agreements having a term of less than one (1) year that are negotiated on an arms-length basis in the ordinary course of business and contemplated by the Annual Business Plan and Budget; and |
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14) | any commitment or agreement or delegation of powers to do any of the foregoing. |
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SCHEDULE N LIST OF COMPETITORS
1. | Adani Power and Affiliates |
2. | Aessolar and Affiliates |
3. | Ashtonfield and Affiliates |
4. | Conergy group |
5. | Enfinity and Affiliates |
6. | Epuron Renewables and Affiliates |
7. | Euro group |
8. | India Bulls and Affiliates |
9. | Jindal power and Affiliates |
10. | Moser Baer and Affiliates |
11. | Recurrent Energy and Affiliates |
12. | Reliance and Affiliates |
13. | Sun Edison and Affiliates |
14. | Sunpower and Affiliates |
15. | Titan Energy and Affiliate |
16. | Torrent power and Affiliates |
17. | Welspun Group |
18. | Aditya Birla Group |
19. | Mahindra Group |
20. | Kiran Energy and Affiliates |
21. | Green Infra Limited and Affiliates |
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SCHEDULE O - DEG EXCLUSION LIST
1. | Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as pharmaceuticals, pesticides/herbicides, chemicals, ozone depleting substances, PCBs wildlife or products regulated under CITES. |
2. | Business relating to pornography or prostitution. |
3. | Production and distribution of racist, anti-democratic and/or neo-nazi media. |
4. | Cross-border trade in waste and waste products unless complaint to the Basel Convention and the underlying regulations. |
5. | Production or trade in weapons and munitions. |
6. | Production or trade in alcoholic beverages (excluding beer and wine). |
7. | Production or trade in tobacco. |
8. | Gambling, casinos and equivalent enterprises. |
9. | Production or trade in radioactive materials. This does not apply to the purchase of medical equipment, quality control (measurement) equipment and any equipment where a Supranational Investor considers the radioactive source to be trivial and/or adequately shielded. |
10. | Production or trade in unbounded asbestos fibers. This does not apply to purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%. |
11. | Drift net fishing in the marine environment using nets in excess of 2.5km. in length, |
12. | Production or activities involving harmful or exploitative forms of forced labor/harmful child labor. |
13. | Destruction 7 of Critical habitats 8 |
14. | Commercial logging operations for use in primary tropical moist forest. |
15. | Production or trade in wood or other forestry products other than from sustainably managed forest. |
7 | Destruction mans the (10 elimination or serve diminution of the integrity of a habitat caused by a major, long-term change in land or water use or (2) modification of a habitat in such a way that habitats ability to maintain its role (se footnote 10) is lost. |
8 | Critical habitat is a subset of both natural and modified habitat that deserves particulars attention. Critical habitat includes areas with high biodiversity value that meet the criteria of the World Conservation Union (IUCN) classification, including habitat required for the survival of critically endangered or endangered species as defined by the IUCN Red List of Threatened Species or as defined in any national legislation: areas having special significance for endemic or restricted-range species; sites that are critical for the survival of migratory species; areas supporting globally significant concentrations or numbers of individuals of congregatory species; areas with unique assemblages of species or which are associated with key evolutionary processes or provide key ecosystem services; and areas having biodiversity of significant social, economic or cultural importance to local communities. Primary Forest or forests of High Conservation Value shall be considered Critical Habitats. |
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SCHEDULE P PROPARCO POLICY COVENANTS
1. | Representations |
The Company and the Sponsors represent that the equity, quasi equity and shareholders loans accounts invested in the Company and its Subsidiaries or in their Operations are not of Illicit Origin.
The Company and the Sponsors represent that, in the 5 (Five) years preceding the date of this Agreement, no res judicata decision, sentence, or order has been pronounced against the Company or its Subsidiaries in relation to any Corrupt Practice or Fraudulent Practice or any Anti-Competitive Practice.
2. | Undertakings |
The Company and the Sponsors undertake that the Company and its Subsidiaries will:
i. | not enter into Business Relationships with persons or entities which appear on any of the Financial Sanctions Lists. |
ii. | Not finance, buy or provide, materials or sectors subject to United Nations, European Union or French Embargo and/or shall not engage in any sectors under United Nations, European Union or French Embargo. |
iii. | and ensure that the Companys and each of its Subsidiarys equity, quasi equity and shareholders loans accounts are not and will not be of Illicit Origin. |
iv. | and ensure that the Companys and each of its Subsidiarys activities will not give rise to Corrupt Practice, Fraudulent Practice or Anti-Competitive Practices. |
v. | as soon as it becomes aware of any Corrupt Practice, Fraudulent Practice or Anti-Competitive Practice or such alleged practices, inform Proparco without any delay and take all necessary preliminary steps to remedy the alleged Corrupt Practice, Fraudulent Practice or Anti-Competitive Practice to the satisfaction of Proparco within the time limit determined by Proparco which in any event shall not be more than thirty (30) business days. |
vi. | For any payment made under this Agreement to Proparco shall request that the bank in charge of making the transfers includes in its transfer message all of the following information and in the following order: |
| Instructing party: name, address, bank account number. |
| Bank of the instruction party. |
| The following references: name of instructing party, payment purpose, numéro du concours tbc |
The Company and the Sponsors undertake to provide to any Investor in the Company who so requests all information regarding the identity of each of the other Investors and their respective Beneficial Owners.
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The Company and the Sponsors shall notify Proparco as soon as practicable if an additional Investor representing more than 5% (five per cent) of the Companys share capital subscribes to the share capital of the Company.
3. | Other representations and undertakings: Proparco Environmental & Social Requirements |
a. | Definitions |
Anti Competitive Practice refers to:
i. any common or implied action having as object and/or as effect to impede, restrict or distort fair competition in a market, in particular when it tends to: (1) restrict market access or the free exercise of competition by other companies; (2) prevent price fixing by the free play of markets by artificially favouring the increase or reduction of prices; (3) limit or control production, markets, investments or technical progress or, (4) share out markets or sources of supply;
ii. any abuse by a company or a group of companies of a dominant position within an internal market or in a substantial part of it;
iii. any bid or predatory pricing having as object and/or as effect to eliminate from a market or to prevent a company or one of its product from accessing a market.
Associated Facilities means the facilities, including all transmission lines, that are not funded as part of the Project (funding may be provided separately by a client or a third party including the government), and that would not have been constructed or expanded if the Project did not exist and without which the Project would not be viable.
Basic Terms and Conditions of Employment means the requirements as applicable to the Company or its Subsidiaries (as the case may be) on wage, working hours, labour contracts and occupational health & safety issues, stemming from ILO conventions 26 and 131 (on remuneration), 1 (on working hours) and 155 (on health & safety).
Business Relationships means any professional or commercial contractual relationship established between a third party and the Company or its Subsidiaries and connected with the professional activities of the latter.
Core Labour Standards means the requirements as applicable to the Company or its Subsidiaries (as the case may be) on child and forced labour, discrimination and freedom of association and collective bargaining, stemming from the ILO Declaration on Fundamental Principles and Rights at Work, adopted in 1998 and covering: (i) freedom of association and the right to collective bargaining, (ii) the elimination of forced and compulsory labour, (iii) the abolition of child labour and (iv) the elimination of discrimination in the workplace.
Corrupt Practice means the following acts:
i. the promise, offering or giving, directly or indirectly, to a Public Official or to any person who directs or works, in any capacity, for a private sector entity, of an undue advantage of any nature, for the relevant person himself or herself or for another person or entity, in order that this person acts or refrains from acting in the exercise of his or her official duties or in breach of his or her legal, contractual
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or professional obligations having for effect to influence his or her own actions or the ones of another party or entity;
ii. the solicitation or acceptance, directly or indirectly, by a Public Official or by any person who directs or works, in any capacity, for a private sector entity, of an undue advantage of any nature, for the relevant person himself or herself or for another person or entity, in order that this person acts or refrains from acting in the exercise of his or her official duties or in breach of his or her legal, contractual or professional obligations having for effect to influence his or her own actions or the ones of another party or entity.
Embargo means any economic sanction aiming at prohibiting the import and/or export (sale, supply, transfer) of one specific or several goods, products or services to or from a country for a specified period as published and amended from time to time by the UN, EU and France.
Environmental and Social Action Plan or ESAP means the environmental and social action plan, agreed upon between Proparco and the Company (which is provided below in Annex A to this Schedule P), defining actions, responsibilities, budgets and a timeframe for the measures required to remedy the known non- compliances of the Company and its Subsidiaries with the Environmental and Social Requirements in the business activities of the Company and its Subsidiaries and the Associated Facilities as amended from time to time.
Environmental and Social Claim means any claim, proceeding or investigation by a person in respect of an Environmental Law, a Social Law or an environmental or social agreement between the Company and another person.
Environmental and Social Management System means the part of the overall management system of the Company and its Subsidiaries that includes the organisational structure, planning activities, responsibilities, practices, procedures and resources for developing, implementing, achieving, reviewing and maintaining compliance with the Environmental and Social Requirements and which is dedicated to the structural improvement of the environmental and social performance of the Company and its Subsidiaries satisfactory to Proparco.
Environmental and Social Monitoring Report means an annual written environmental and social monitoring report to be submitted to Proparco, in the form satisfactory to Proparco, after the end of each Financial Year but in any event no later than the date it has to deliver its audited or consolidated annual financial statements, setting out the specific social, environmental and developmental impact information to be provided by the Company and its Subsidiaries in respect of their Operations, and such form of Environmental and Social Annual Monitoring Report may be amended or supplemented from time to time with the consent of Proparco.
Environmental and Social Permit means any environmental and/or social permit license, consent, approval or other Authorisation required by the Company and its Subsidiaries.
Environmental and Social Requirements means (i) Environmental Law, (ii) Social Law, (iii) Environmental and Social Permit, (iv) Basic Terms and Conditions of Employment, (v) Core Labour Standards and (vi) the IFC Performance Standards as applicable to the Company and its Subsidiaries from time to time.
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Environmental Law means any law, rule or regulation (including international treaty obligations) applicable at national and state levels concerning environmental matters and natural resource management.
Financial Sanctions Lists means the list of persons, groups or entities which are subject to United Nations, European Union or French financial sanctions. For information purposes only and not for the benefit of the company (who may not rely on the references listed below and provided by Proparco):
(a) As regards the United Nations, the lists may be consulted at the following address: http://www.un.org/sc/committees/list_compend.shtml;
(b) As regards the European Union, the lists may be consulted at the following address: http://eeas.europa.eu/cfsp/sanctions/consol-Iist_en.htm; and
(c) As regards France, see http://www.tresor.economie.gouv.fr/4248_Dispositif- National-de-Gel-Terroriste
Fraud against the Financial Interests of the European Communities refers to any intentional action or omission intended to damage the European Union budget and involving (i) the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds or illegal diminution of resources of the general budget of the European Union, (ii) the non-disclosure of information, with the same effect and (iii) the misapplication of such funds for purposes other than those for which they were originally granted.
Fraudulent Practice refers to any unfair practices (action or omission) intended to deliberately mislead a third party, intentionally conceal elements there from, or betray or vitiate his/her consent, contravening legal or regulatory obligations and/or breaching the Borrowers or a third party internal rules for the purpose of obtaining an illegitimate benefit.
IFC Performance Standards means the IFC performance standards on social and environmental sustainability (including the technical reference documents known as IFCs Environmental, Health, and Safety Guidelines) which can be downloaded from the IFC website (http://www.ifc.org/ifcext/enviro.nsf/).
Illicit Origin means funds obtained through:
i. the commission of any predicate offence as designated in the FATF 40 Recommendations Glossary (http://www.fatf-gafi.org/pages/glossary/fatfrecommendations/d-i/),
ii. Corrupt Practice, and
iii. if or when applicable, through Fraud against the Financial Interests of the European Communities.
ILO means the International Labour Organisation, the tripartite United Nations agency which brings together governments, employers and workers of its member states in common action to promote decent work throughout the world.
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Public Official means:
i. any holder of legislative, executive, administrative or judicial office appointed or elected, serving on a permanent basis or otherwise, paid or unpaid, regardless of rank;
ii. any other person exercising a public function, including for a public agency or company, or providing a public service;
iii. any other person defined as a public official under the domestic law of the Borrowers country.
Social Law means any law, rule or regulation (including international treaty obligations) applicable at national and state levels concerning (i) labour, (ii) social security, (iii) the regulation of industrial relations (between government, employers and employees), (iv) the protection of occupational as well as public health and safety, (v) the regulation of public participation, (vi) the protection and regulation of ownership of land rights (both formal and traditional), immovable goods and intellectual and cultural property rights, (vii) the protection and empowerment of indigenous peoples or ethnic groups, (viii) the protection, restoration and promotion of cultural heritage, (ix) all other laws, rules and regulations providing for the protection of employees and citizens.
b. | Representation |
Compliance with Environmental and Social Requirements
The Company represents that the Company and its Subsidiaries comply in all material respects with the Environmental and Social Requirements and for those items addressed in the Environmental and Social Action Plan, become compliant within the time-frames agreed upon from time to time.
Environmental and Social Claims
No Environmental and Social Claim has been commenced or (to the best of its knowledge and belief) is threatened against it except for the Environmental and Social Claims addressed in the Environmental and Social Action Plan.
c. | Information Undertakings |
Periodic environmental and social monitoring reporting
The Company shall as soon as it is available, but in any event no later than the date it has to deliver its audited or consolidated annual financial statements, deliver to the Shareholders an Environmental and Social Monitoring Report in the English language.
Reporting Impact Indicators
For so long as Proparco holds any Equity Securities in the Company, the Company shall furnish to Proparco and/or their assignees/nominees all information as required by Schedule W with respect to the Company and its Subsidiaries on an annual basis within 90 (Ninety) days from the end of each Financial Year
Notification of incidents
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The Company shall promptly, but in any event within 3 days after the occurrence of any of the events set out in this Sub-clause, supply to the shareholders of the Company (including Proparco) (i) details of any incident of an environmental nature (including without limitation any explosion, spill or workplace accident which results in death, serious or multiple injuries or material environmental contamination) or any incident of a social nature (including without limitation any violent labour unrest or dispute with local communities), occurring on or nearby any site, plant, equipment or facility of the Company or Subsidiaries (as the case may be) which has or is reasonably likely to have a Material Adverse Effect or which has a material negative impact on the environment, the health, safety and security situation, or the social and cultural context, together with, in each case, a specification of the nature of the incident or accident and the on-site and off-site effects of such events and (ii) details of any action the Company or Subsidiaries (as the case may be) proposes to take in order to remedy the effects of these events, and shall keep the shareholders (including Proparco) informed about any progress in respect of such remedial action.
Environmental and Social Claim
The Company shall inform the Shareholders in writing as soon as reasonably practicable upon becoming aware of the same of (i) any Environmental and Social Claim being commenced against it and (ii) any facts or circumstances which will or are reasonably likely to result in any Environmental and Social Claim being commenced or threatened against it.
d. | Positive Undertakings |
Compliance with Environmental and Social Requirements
The Company shall in all material respects comply, and shall ensure that its Subsidiaries comply with the Environmental and Social Requirements and for those items addressed in the Environmental and Social Action Plan, become compliant within the time-frames agreed upon as amended from time to time and take all reasonable steps in anticipation of known or expected future changes to or obligations under the same.
Environmental and Social Management
The Company and its Subsidiaries undertake to ensure that its Subsidiaries will diligently design, construct, operate, maintain and monitor all of its plants, sites and equipment in a safe, efficient and business-like manner.
The Company and its Subsidiaries shall implement, maintain and continuously improve an adequate Environmental and Social Management System.
The Company and its Subsidiaries shall maintain a senior officer of the Company with management responsibility, who will among other things, ensure proper operation and maintenance of the Environmental and Social Management System.
Environmental and Social Action Plan
The Company and its Subsidiaries shall implement all actions as provided in the Environmental and Social Action Plan within the time-frames mentioned.
Access for environmental and social monitoring
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The Company and its Subsidiaries shall permit employees of the Shareholder and/or consultants or other professional advisers and contractors on behalf of the Shareholders free access at all reasonable times and on reasonable notice at the cost of the Company to carry out environmental and/or social monitoring visits by, (a) viewing the premises of the Company and its Subsidiaries and (b) meeting and discussing matters with senior management and employees of the Company and its Subsidiaries. The Company shall assist on a best effort basis in getting permission to visit plants and Associated Facilities of its clients and providers.
e. | Negative undertakings |
Excluded Activities
The Company and its Subsidiaries shall not perform any of the excluded activities as listed in the Annex B to this Schedule P below (Excluded Activities).
4. | Proparco Buyback Events |
Business Relationship
| The existence of a Business Relationships with persons or entities which appear on any of the Financial Sanctions Lists. |
| The Company or the Sponsor finances, buy or provides, materials or sectors subject to United Nations, European Union or French Embargo and/or shall not engage in any sectors under United Nations, European Union or French Embargo. |
Illicit Origin of Funds
| The Companys and each of its Subsidiarys equity, quasi equity and shareholders loans accounts are of Illicit Origin. |
Corruption
| The Companys and each of its Subsidiarys activities has been involved in Corrupt Practice, Fraudulent Practice or Anti-Competitive Practices. |
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ANNEX A TO SCHEDULE P
PROPARCO ENVIRONMENTAL AND SOCIAL ACTION PLAN
Item
|
Measure and/or Corrective Actions |
Responsibility |
Deliverable
Document) |
Deadline |
||||
1. | PS 1: Assessment and Management of Environmental and Social Management Risks and Impacts | |||||||
1.1. |
Develop a comprehensive Social Baseline Survey procedure for assessing in details the land acquisition process including past land occupation and potential physical and/or economical resettlements that may have occurred as result of project settlement. To be included in the future ESIA reports |
SHES department | Detailed social baseline survey procedure | 3 months after the signing date | ||||
1.2. |
Reinforce the ESIA studies regarding earth movement management and water management |
SHES department | Futurer ESIAs | On-going action | ||||
2. | PS 3: Resource Efficiency and Pollution Prevention | |||||||
2.1. |
Update the monitoring procedure to include the monitoring and recording of water consumption |
SHES department | Monitoring procedure including water consumption monitoring. | 3 months after the signing date |
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ANNEX B TO SCHEDULE P
ENVIRONMENTAL AND SOCIAL EXCLUSION LIST
1) | Production or trade in any product or activity deemed illegal under host country laws and France or regulations or international conventions and agreements. |
2) | Production or activities involving forced labour 9 or child labour 10 |
3) | Trade in wildlife or wildlife products regulated under CITES 11 |
4) | Drift net fishing in the marine environment using nets in excess of 2.5 km in length. |
5) | Destruction 12 of Critical Habitat 13 and any forest project under which no sustainable development and managing plan is carried out. |
6) | Production or use of or trade in hazardous materials such as asbestos fibers and products containing PCBs 14 . |
7) | Production, use of or trade in pharmaceuticals, pesticides/herbicides, chemicals, ozone depleting substances 15 and other hazardous substances subject to international phase-outs or bans. |
8) | Cross-border trade in waste and waste products unless compliant to the Basel Convention and the underlying regulations. |
9) | Production or trade in 16 |
a) | weapons and munitions |
b) | tobacco |
c) | hard liquor for human consumption. |
9 | Forced labor means all work or service, not voluntarily performed, that is extracted from an individual under threat of force or penalty as defined by ILO conventions. |
10 | Employees may only be taken if they are at least 14 years old, as defined in the ILO Fundamental Human Rights Conventions (Minimum Age Convention C138, Art. 2), unless local legislation specifies compulsory school attendance or the minimum age for working. In such cases the higher age shall apply. |
11 | CITES: Convention on International Trade in Endangered Species or Wild Fauna and Flora. |
12 | Destruction means the (1) elimination or severe diminution of the integrity of a habitat caused by a major, long-term change in land or water use or (2) modification of a habitat in such a way that the habitats ability to maintain its role (see footnote 10) is lost. |
13 | Critical habitat is a subset of both natural and modified habitat that deserves particular attention. Critical habitat includes areas with high biodiversity value that meet the criteria of the World Conservation Union (IUCN) classification, including habitat required for the survival of critically endangered or endangered species as defined by the IUCN Red List of Threatened Species or as defined in any national legislation; areas having special significance for endemic or restricted-range species; sites that are critical for the survival of migratory species; areas supporting globally significant concentrations or numbers of individuals of congregatory species; areas with unique assemblages of species or which are associated with key evolutionary processes or provide key ecosystem services; and areas having biodiversity of significant social, economic or cultural importance to local communities. Primary Forest or forests of High Conservation Value shall be considered Critical Habitats. |
14 | PCBs: Polychlorinated biphenyls, a group of highly toxic chemicals. PCBs are likely to be found in oil-filled electrical transformers, capacitors and switchgear dating from 1950-1985. |
15 | Ozone Depleting Substances: Chemical compounds, which react with and delete stratospheric ozone, resulting in holes in the ozone layer. The Montreal Protocol lists ODs and their target reduction and phase-out dates. |
16 | Activities excluded when representing more than 10 % of the balance sheet or the financed volume and for Financial Institutions more than 10% of the portfolio volume financing. |
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10) | Gambling, casinos and equivalent enterprises 17 |
11) | Any business relating to pornography or prostitution. |
12) | Any activity involving significant altercation, damage or removal of way critical cultural heritage 18 |
13) | Production and distribution of racist, anti-democratic or with the intent to discriminate part of the population. |
14) | Exploitation of diamond mines, and commercialization of diamonds, when the host country has not adhered to the Kimberley 19 , or other similar international agreements (actual or to be formed), on similar extractive resources. |
15) | Any sector or service subject to United Nations, European Union and/or French Embargo without limitation. |
17 | Activities excluded when representing more than 10% of the balance sheet or the financed volume and for Financial Institutions more than 10% of the portfolio volume financing |
18 | Consists of internationally and nationally recognised historical, social and/or cultural heritage. |
19 | The Kimberley Process Certification Scheme (KPCS), is a certification standard for diamond production that concerns governments; the diamonds are controlled at each stage of the production chain, from extraction through to retail of the finished product. The KPCS was created to prevent and stop conflict diamond trade. It is designed to certify the origin of diamonds from sources which are free of conflict fueled by diamond production. Member states adhere to adopt national laws on the issue, and to put in place the necessary export and import control mechanisms to implement the KPCS. More than 75 countries involved in the production, commercialization, and transformation of diamonds participate. |
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SCHEDULE Q - VOTING PERCENTAGES
1) | On and from the date of this Agreement and subject to paragraph (2) below, the voting percentages with respect to DEG CCDs, IFC II CCDs, IFC III CCDs and Proparco CCPS and the voting percentages with respect to Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS and Series F CCPS on an As If Converted Basis in relation to Clause 11.8.2 shall be as under: |
Helion Venture Partner India II, LLC & Helion Venture Partners II, LLC |
25.94 | % | ||
FC VI India Venture (Mauritius) Ltd. |
27.73 | % | ||
IFC for CCDs and CCPS |
17.33 | % | ||
GIF |
16.61 | % | ||
DEG |
5.80 | % | ||
Proparco for Series E CCPS & Series G CCPS |
6.59 | % |
* | This % calculation is without considering shareholding of Sponsors, Azure Power Inc., Satnam Sanghera and ESOPs. |
** | This calculation is based on post-money valuation of investment in Series H CCPS. |
2) | On the Transfer of Equity Securities by any Investor, and on the issue of any Equity Securities by the Company, the Investors shall agree upon the revised voting percentages in respect of Clause 11.8.2 and the above voting percentages shall no longer be applicable. The Parties further agree that the voting percentages in respect of Clause 11.8.2 for IFC II CCDs, IFC III CCDs, DEG CCDs and Proparco CCPS on As If Converted Basis will not exceed the voting percentages of IFC in relation to its Equity Shares and compulsory convertible preference shares. |
3) | It is clarified that the above voting percentages are not reflective of the (present or future) shareholding of the Investors in the Company for any purpose whatsoever other than with respect to Clause 11.8.2. |
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SCHEDULE R TERMS AND CONDITIONS OF IFC III CCDs
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Form and Status of IFC III CCDs |
Each of IFC III CCDs shall have the issue price of USD 83.10 (United States Dollars Eighty Three and Ten Cents).
2. | Term |
Unless converted in accordance with the terms of this Schedule R, the Articles of the Company and applicable Laws, the term of the IFC III CCDs shall be a maximum of 20 (twenty) years from their issuance. The date on which the IFC III CCDs were issued and allotted to IFC shall be referred as IFC Subscription Closing Date .
3. | Interest |
3.1 | The IFC III CCDs will bear interest at the rate of 5% (five percent) per annum up to the date of their conversion into Equity Shares of the Company in accordance with paragraph 4 below. |
3.2 | The interest will accrue for a period of 18 (eighteen) months from issuance of the IFC III CCDs and will be paid at the end of this period, subject to applicable Law, followed by quarterly payments on the 15 th (fifteenth) day of the relevant month of such quarterly payment until the date of conversion and the interest payable in respect of each calendar year shall be calculated by dividing the annual interest due by 365 (three hundred and sixty five). In relation to such interest payments, IFC shall provide its account details no later than 1 (one) month before the payment is due. If full interest payment cannot be made during an applicable period, due to any constraints including but not limited to regulatory constraints, then the unpaid interest payment will accrue and be paid in subsequent periods, compounded for the period of delay in payment. |
3.3 | If the dividend payout in any given financial year to the Shareholders or to the holders of Series A CCPS (as defined in the SHA) or to the holders of Series B CCPS (as defined in the SHA) or to the Series C CCPS (as defined in this SHA) of the Company, whichever is highest, is more than 5% (five per cent) of the amount invested for such securities by the holder of those securities, then the holders of the IFC III CCDs will be entitled to an additional interest which shall be equal to the difference between (a) the percentage return (on the amount invested) received by the holders of such Equity Shares or the holders of Series A CCPS or the holders of Series B CCPS or to the holders of Series C CCPS; and (b) the rate of interest received by the holder of the IFC III CCDs for that financial year under the terms of paragraph 3.1. |
3.4 | For the purposes of calculation of interest, the issue price (i.e. par value and premium) of each IFC III CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 60.17. The payment of interest shall, however, be |
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made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the interest is paid out by the Company. |
4. | Conversion |
4.1 | The IFC III CCDs shall be convertible into Equity Shares of the Company at the option of the holders of the IFC III CCDs in accordance with paragraph 4.2. Any IFC III CCDs that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the IFC Subscription Closing Date in relation to the IFC III CCDs (the Maturity Date ), |
in each case, in accordance with this SHA. Upon occurrence of any of the event under paragraph 4.1 (i) and (ii) above the Company (and the Sponsors, where applicable) will immediately follow the procedure under paragraph 4.2 (iv) below.
4.2 | Optional Conversion |
The holders of the IFC III CCDs shall have the right, in the events set out in paragraph 4.2 (ii) of this Schedule after the IFC Subscription Closing Date of IFC III CCDs to require the Company, by a written notice (the Conversion Notice ), to convert all or some of the IFC III CCDs into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, IFC, GIF, Proparco, Helion and FC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days trom the date of the Conversion Notice.
(i) | Conversion Ratio & Conversion Price |
(a) | The Conversion Ratio for the purposes of IFC III CCDs shall be such that each IFC III CCD will convert into such number of Equity Shares, so as to give the IFC III CCD holders the IFC III Required Return, without IFC being required to pay any amount for such conversion. |
For purposes of this paragraph, the term IFC III Required Return for the purposes of the IFC III CCDs shall mean (aa) 16% (sixteen percent) IRR; or (bb) 18.4% (Eighteen point four Percent) IRR, in the event of conversion of the IFC III CCDs into Equity Shares of the Company (a) in accordance with paragraph 4.1 (i) of this Schedule R, or (b) upon Transfer of the Equity Securities in terms of Clause 6.3.4 of the SHA, or (c) upon a voluntary sale of any or all the Equity Securities held by all the Investors and the voluntary sale of Equity Securities held by the Sponsors to a third party, such that pursuant to the sale of the Equity Securities there is a change in Control on the Company, or (d) upon a Liquidation Event B other than upon Transfer of all or more than 70% (seventy percent) in value of the Companys Assets. For calculating the IFC III Required Return, the return of 16% (sixteen percent) IRR or
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18.4% (eighteen point four percent) IRR, as the case may be, shall be calculated from 25 th June 2014 till the date of the conversion of the IFC III CCDs.
Provided that, if the IFC III CCD holder receives any interest from the Company prior to conversion, the value of the same will be deducted from the IFC III Required Return.
For the calculation of the IFC III Required Return, the aggregate investment amounts in IFC III CCDs shall be considered in INR terms by applying the USD-INR conversion rate of USD 1 = INR 60.17 to the IFC III CCDs Investment Amount.
(b) | A valuation of the Company to enable conversion of the IFC III CCDs in accordance with (a) above shall be: |
1) | for the events specified in paragraph 4.2 (ii) (a), (b) and (g) and paragraph 4.1( ii), the valuation as determined by one of the Big Four Accounting Firms selected in accordance with the procedure laid down in paragraph 4.2 (c) below; |
2) | for the events specified in paragraph 4.2(ii) (c), (d), (e) and (f), the valuation as offered by the third party purchaser; and |
3) | for the events specified in paragraph 4.3(i), the valuation per Equity Share (on a fully diluted basis after giving effect to the conversion of all Equity Securities that are convertible to Equity Shares, as provided in the SHA) shall be equal to the initial public offering price of Equity Shares offered for sale/issue of Equity Shares by the Company pursuant to the IPO or QIPO.. |
(c) | IFC shall set out in the Conversion Notice, the names of 2 (two) of the Big Four Accounting Firms that are selected by IFC for the purpose of paragraph 4.2(i)(c). Within 10 (ten) days of the date of the Conversion Notice, IFC, Helion, FC, Proparco, Company and Sponsors shall jointly agree to appoint one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company, and shall jointly issue a notice to IFC in this respect. If IFC does not receive the aforesaid notice within the period of 10 days from the date of the Conversion Notice, then IFC shall have the right to select, in its sole discretion, one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion notice to do the valuation of the Company. |
(ii) | The holders of the IFC III CCDs will be entitled to exercise their conversion right in respect of the IFC III CCDs just prior to or on the occurrence of the following events: |
(a) | Liquidation Event A or Liquidation Event B as defined in the SHA. |
(b) | Buy-back of the IFC III CCDs in accordance with the terms of the SHA. |
(c) | In the event holder of the IFC III CCDs wishes to exercise its Co-Sale Right under Clause 6.3.3 (Co -Sale Rights) of the SHA. |
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(d) | In the event holder of the IFC III CCDs wishes to exercise its Co-Sale Right under Clause 6.3.4 (Transfer to a Competitor) of the SHA. |
(e) | In the event holder of the IFC III CCDs wishes to exercise its Drag Along Right under Clause 6.4 (Drag Right to the Investors) of the SHA. |
(f) | In the event holder of the IFC III CCDs wishes to exercise its right under Clause 6.5 (Drag Right of DEG, IFC and Proparco) of the SHA. |
(g) | In the event holder of the IFC III CCDs wishes to exercise the Deficit Call Option under Clause 6.6 (IFC, DEG and Proparco Call Option) of the SHA. |
(iii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of IFC III CCDs in respect of which the holders of the IFC III CCDs are exercising their right to conversion in accordance with this paragraph 4.2; |
(b) | The number of Equity Shares of the Company that the IFC III CCDs shall convert into; and |
(c) | The names of 2 of the Big Four Accounting Firms that are selected by IFC for the purpose of paragraph 4.2(i)(c), if applicable; and the reference valuation as offered by the third party purchaser, if applicable. |
(iv) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company approve the following: |
| The conversion of such number of the IFC III CCDs; |
| The cancellation of the certificates representing such number of IFC III CCDs that are converted; |
| The issuance and allotment of such number of Equity Shares of the Company that the IFC III CCDs shall convert into. |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the debenture certificates of IFC III CCDs in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the IFC III CCDs to evidence such holders of the IFC III CCDs as the owners of the Equity Shares issued upon conversion of such number of the IFC III CCDs as are mentioned in the Conversion Notice; |
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(c) | Updating its register of members to reflect the holders of the IFC III CCDs as the owners of the Equity Shares issued pursuant to the conversion of such number of the IFC III CCDs as are mentioned in the Conversion Notice; and updating the register of debenture holders to indicate the conversion of the IFC III CCDs into Equity Shares |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provision of this paragraph 4, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the IFC III CCDs. |
4 . 3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the IFC III CCDs into Equity Shares based on the conversion price arrived in accordance with paragraph 4.2(i), if at any time after the IFC Subscription Closing Date the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The IFC III CCDs shall convert into Equity Shares of the Company immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the Relevant Market in respect of the QIPO or an IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the IFC III CCDs into Equity Shares of the Company; and |
(b) | The QIPO or the IPO docs not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market (as defined in the SHA) on or prior to the Listing Date. |
Then such conversion of IFC III CCDs into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the SHA and shall undertake all necessary actions to ensure that the holders of the IFC III CCDs are placed in the same position, and possess the same rights as set forth in this Schedule R, they had the benefit of immediately prior to the occurrence of the event set forth in (i) above.
5. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries and in accordance with the terms of the SHA, the holders of the JFC III CCDs shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
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Upon the exercise of the Drag Right of the Investors or Drag Right of DEG, IFC and Proparco in accordance with Clause 6.4 and 6.5 of the SHA, the IFC III CCDs shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in the SHA. Notwithstanding the above, the holders of the IFC III CCDs will also be entitled to the buy-back preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by IFC pursuant to the conversion of the IFC III CCDs shall be treated at par with the remaining Equity Shares of the Company for the purposes of this paragraph 5, save and except where the IFC III CCDs are converted into Equity Shares of the Company on or immediately prior and only in connection with IFC exercising its right in the case of events set out in this paragraph 5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the IFC III CCDs will be entitled to priority in terms of payment in the like manner as the IFC III CCDs as set out in this paragraph 5.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of IFC III CCDs shall be considered in INR terms by applying the USD- INR conversion rate of USD 1 = INR 60.17 to the IFC III CCDs Investment Amount. However, to the extent relevant, at the time of payment of amounts to the holders of IFC III CCDs in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
6. | Transferability |
Subject to the terms of the SHA, the IFC III CCDs shall be freely transferable to any person and holders of the IFC III CCDs may assign all or any of the IFC III CCDs and any rights attaching thereto under the SHA, without the prior consent of any Person.
7. | Voting Rights |
From and after the issuance of the IFC III CCDs, IFC shall only be entitled to exercise voting rights on every resolution in respect of Schedule M placed before the Company on the basis of its shareholding in the Company on an As if Converted Basis subject to the terms of the SHA. Provided however that upon the transfer of the IFC III CCDs in accordance with the terms of the SHA, the transferee of the IFC III CCDs will be entitled to vote on every resolution placed before the Company in proportion to the Equity Shares held by such transferee in the share capital of the Company, assuming the transferred IFC III CCDs have been converted into Equity Shares of the Company on the basis of the conversion price as determined in paragraph 4.2(i) above.
From the date of conversion of the IFC III CCDs, the voting percentage of all the shareholders in the Company shall be in proportion to their shareholding in the Company.
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For the avoidance of doubt, it is hereby clarified, that IFC shall be entitled to exercise its voting rights as a debenture holder in the Company available to it under applicable Law.
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SCHEDULE S TERMS AND CONDITIONS OF SERIES F CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series F CCPS shall have the issue price as indicated in Schedule Y of this Agreement.
2. | Dividend |
Each of the holders of Series F CCPS shall be entitled to payment of 8% (eight per cent) noncumulative dividend per annum (calculated on the issue price) on each of the Series F CCPS by way of dividend from the Company in accordance with applicable Law as and when the Board of the Company declares any dividend. The dividends payable on the Series F CCPS shall be senior to dividend payments to holders of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS and other Equity Shares of the Company. Subject to applicable Law, each of the holders of Series F CCPS shall be individually entitled, in addition and cumulative to the above, to participate in the distribution of the profits of the Company made to the other shareholders of the Company (for the purpose of this paragraph all the Series F CCPS shall be assumed as if have been converted to the Equity Shares at the Conversion Factor).
For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series F CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the dividend is paid out by the Company.
3. | Term |
Unless converted in accordance with the terms of this Schedule, the Articles of the Company and applicable Laws, the term of the Series F CCPS shall be a maximum of 20 (twenty) years from the date of their issuance.
4. | Voting |
4.1 | The holders of Series F CCPS shall be entitled to attend all meetings of Shareholders of the Company. Series F CCPS shall be entitled to vote on all such matters which affect their rights directly or indirectly (including the consent rights of the Investors under the Agreement). To the extent (and as and when permitted under applicable Law), the Series F CCPS shall be entitled to voting rights assuming the Series F CCPS have been converted into Equity Shares of the Company on the basis of the Conversion Factor set out below. |
4.2 | From the date of conversion of the Series F CCPS into Equity Shares, the voting percentage of all their holders in the Company shall be in proportion to their shareholding in the Company. |
5. | Conversion |
5.1 | The Series F CCPS shall be convertible into Equity Shares of the Company at the option of the holders of the Series F CCPS in accordance with paragraph 5.2. Any Series F CCPS that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company in accordance with paragraph 5.3 below, upon the earlier of: |
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(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the date of the issuance of the Series F CCPS (the Maturity Date) , |
in each case, in accordance with the terms of the Agreement.
5.2 | Optional Conversion |
(i) | The holders of the Series F CCPS shall severally have the right, at any time and from time to time at their sole option after their issuance, to require the Company, by written notice (the Conversion Notice), to convert their respective Series F CCPS into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, Proparco, Helion, FC, DEG and IFC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice. The Series F CCPS will be convertible into Equity Shares of the Company at a conversion ratios of 1:1 (the Conversion Factor), without being required to pay any amount for such conversion. However, if the holders of Series F CCPS are unable to receive amounts equal to their entitlements under the provisions of the Agreement (as amended from time to time) dealing with Liquidation Event A in the Company, Drag right of the Investor, Drag right of IFC, DEG and Proparco and Buy back of Equity Securities (as applicable) on the basis of the Conversion Factor of 1:1, then each Series F CCPS shall be converted at such higher conversion ratio that will permit the holders of Series F CCPS to receive the amounts that they are entitled under the provisions of Agreement (as amended from time to time) dealing with Liquidation Event A in the Company, Drag right of the Investor, Drag right of IFC, DEG and Proparco and Buy back of Equity Securities as applicable; in which event the term Conversion Factor shall be reckoned accordingly. For avoidance of doubts, the holders of Series F CCPS shall not be entitled to any proceeds over and above their entitlements under the provisions of Agreement (as amended from time to time) dealing with Liquidation Event A in the Company, Drag right of the Investor, Drag right of IFC, DEG and Proparco and Buy back of Equity Securities, irrespective of the Conversion Factor. |
(ii) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of Series F CCPS in respect of which the holders of the Series F CCPS are exercising their right to conversion in accordance with this paragraph 5.2; and |
(b) | The number of Equity Shares of the Company that the Series F CCPS shall convert into. |
(iii) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company shall approve the following: |
(A) | The conversion of the relevant Series F CCPS; |
(B) | The cancellation of the share certificates representing such number of the Series F CCPS; and |
(C) |
The issuance and allotment of such number of Equity Shares of the Company that the Series F CCPS shall convert into, |
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in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of Series F CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the Series F CCPS to evidence such holders of the Series F CCPS as the owners of the shares issued upon conversion of their respective Series F CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series F CCPS as the owners of the Equity Shares issued pursuant to the conversion of the relevant Series F CCPS as mentioned in the Conversion Notice; |
(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provisions of this paragraph 5, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series F CCPS. |
5.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series F CCPS into shares, based on the Conversion Factor, if at any time after their issuance the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series F CCPS shall convert into Equity Shares of the Company at the Conversion Factor, immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO/IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the Series F CCPS into Equity Shares of the Company; and |
(b) | The QIPO/IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market by the expiry of the Listing Date, |
Then such conversion of Series F CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the Agreement and shall undertake all necessary actions to ensure that the holders of the Series F CCPS are placed in the same position, and possess the same rights as set forth in this Schedule, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
6. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or Liquidation Event B with respect to the Company or its Subsidiaries and in accordance with the terms of this Agreement, the holders of the Series F CCPS shall receive the Liquidation Preference in accordance with the terms of this Agreement and in the order of precedence set forth in this Agreement. Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and Clause 6.5 of this Agreement, the Series F CCPS shall be
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subject to the order of preference in terms of the sale of the Equity Securities and the return on the Equity Securities as set out in this Agreement. Notwithstanding the above, the holders of Series F CCPS will also be entitled to the buy-back preference in accordance with the terms of this Agreement and in order of preference as set out in this Agreement.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of Series F CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement to the amounts invested in Series F CCPS. However, to the extent relevant, at the time of payment of amounts to the holders of Series F CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
7. | Transferability |
Subject to the terms of the Agreement, the Series F CCPS shall be freely transferable to any Person, and the holders of the Series F CCPS may assign all or any of the Series F CCPS and any rights attaching under the Agreement, without the prior consent of any Person.
8. | Anti-Dilution Protection |
8.1 | If the Company offers any Equity Shares on conversion of CCDs and Proparco CCPS, then the holders of Series F CCPS shall be entitled to an anti-dilution protection such that the conversion price of the Series F CCPS is adjusted to ensure that % holding of Series F CCPS after conversion of CCDs and Proparco CCPS shall be same as the % holding of Series F CCPS before conversion of such CCDs and Proparco CCPS. Accordingly the Conversion Factor shall stand revised. It is clarified that the anti-dilution protection provided under this paragraph 8(1) shall not apply to any compulsorily convertible debentures or any other fixed return instrument issued after April 30, 2014. |
8.2 | If the Company offers any preference shares, at a conversion price (the New Price) less than the conversion price (the price at which the Series F CCPS converts into equity) of the Series F CCPS (Dilutive Issuance), then the holders of Series F CCPS shall be entitled to a broad based weighted-average basis anti-dilution protection as provided forth in the Annexure to this Schedule (the Valuation Protection Right). For determining whether the New Price of the Dilutive Issuance is made at lower price than the conversion price of Series F CCPS, the New Price and the conversion price of Series F CCPS shall be taken in INR terms. For this purposes, the New Price of the Dilutive Issuance shall be converted into USD amounts by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such subscription price against the Dilutive Issuance is received by the Company; and the issue price (i.e. par value and premium) of Series F CCPS shall be considered in INR terms by applying the USD-INR conversion rate as indicated in Schedule Y of this Agreement. |
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ANNEXURE TO SCHEDULE S
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Annexure shall be a reference to the paragraph of this Annexure.
1. | Definitions |
For the purposes of this Annexure and unless the context requires a different meaning, the following terms have the meanings indicated.
(a) | Issue Date shall have the meaning ascribed to it in Section 2(a)(ii) of this Annexure. |
(b) | Lowest Permissible Price in relation to a holder of Series F CCPS shall mean the lowest possible price at which a Share may be issued to/acquired by that holder of Series F CCPS in accordance with applicable Law. |
(c) | New Issue Price shall have the meaning prescribed to it in Section 2(a)(i) of this Annexure. |
(d) | Issue Price shall mean the sum equal to the quotient of (x) the total sum paid for the Series F CCPS divided by (y) the number of Series F CCPS initially underlying such Series F CCPS. |
2. | Non-Dilution Protection |
(a) | Issuance below Issue Price. |
(i) | New Issues . If the Company shall at any time or from time to time issue any Preference Shares at a conversion price that is less than the Issue Price (the New Issue Price), other than on a rights basis to all the Shareholders of the Company, then, the holders of Series F CCPS shall be issued additional Equity Shares at par or at the lowest value permitted under applicable Law as would enable them to maintain their shareholding of the Series F CCPS in accordance with Section 2(a)(iii) of this Annexure (Anti-Dilution Issuance) and to such an extent and in such manner as is permitted under applicable Law. |
(ii) | Timing for New Issues . Such Anti-Dilution Issuance shall be made whenever such New Securities are issued in accordance with Section 2(a)(i) of this Annexure, (x) in the case of an issuance to the Shareholders of the Company, as such, to a date immediately following the close of business on the record date for the determination of Shareholders entitled to receive such New Securities and (y) in all other cases, on the date (the Issue Date ) of such issuance; provided, however, that the determination as to whether an Anti-Dilution Issuance is required to be made pursuant to this Section 2 (a) of this Annexure shall be made immediately or simultaneously upon the issuance of such New Securities, and not upon the subsequent issuance of any security into which the New Securities convert, exchange or may be exercised. |
(iii) | Anti-Dilution Issuance . If an Anti-Dilution Issuance is to be undertaken pursuant to an occurrence of any event described in Section 2(a)(i) of this Annexure while the Series F CCPS are outstanding, the conversion price (the price at which the Series F CCPS converts into equity) shall, to the extent permitted under applicable Law, stand adjusted in accordance with the following formula: |
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NCP = (P1) X | (Q1) + (Q2) | |||||
(Q1) + (R) |
For the purposes of this Section, NCP is the new Purchase Price;
P1 is the Issue Price;
Q1 means the number of Equity Shares Outstanding immediately prior to the new issue;
Q2 means such number of Equity Shares that the aggregate consideration received by the Company for such issuance would purchase at Issue Price (Q2=R*(New Issue Price/P1));
R means the number of Equity Shares issuable / issued upon conversion of the New Securities being issued.
For purposes of this condition, the term Equity Shares Outstanding shall mean the aggregate number of Equity Shares of the Company then outstanding (assuming for this purpose the exercise and/or conversion of all then-outstanding securities exercisable for and/or convertible into Equity Shares (including without limitation the conversion of all Preference Shares)).
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SCHEDULE T - TERMS AND CONDITIONS OF SERIES G CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Issue Price |
The Series G CCPS shall have the issue price of USD 450.16 (Dollars Four Hundred and Fifty and Sixteen Cents)
2. | Term |
Unless converted in accordance with the terms of this Schedule T, the Articles of the Company and applicable Laws, the term of the Series G CCPS shall be a maximum of 20 (twenty) years from their issuance.
3. | Dividend |
3.1 | Each of the holders of Series G CCPS shall be entitled to payment of 5% (five percent) non-cumulative dividend per annum (calculated on the sum of the face value and premium paid) on each of the Series G CCPS by way of dividend from the Company in accordance with applicable Law as and when the Board of the Company declares any dividend to any shareholder. |
3.2 | If the dividend payout in any given financial year to the shareholders or to the holders of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS or Series H CCPS of the Company, whichever is highest, is more than 5% (five percent) of the amount invested for such securities by the holder of those securities, then the holders of the Series G CCPS will be entitled to an additional dividend which shall be equal to the difference between (a) the percentage return (on the amount invested) received by the holders of such Equity Shares or the holders of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and Series H CCPS, and (b) the rate of dividend received by the holder of the Series G CCPS for that financial year under the paragraph 3.1 above. It is clarified that in case the Company declares dividends to the holders of Equity Shares, Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and/or Series H CCPS, the holders of Series G CCPS shall be entitled to receive dividends simultaneous with the holders of Equity Shares, Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and/or Series H CCPS in the manner set out above. |
3.3 | For the purposes of calculation of dividends, the issue price (i.e. par value and premium) of each Series G CCPS shall be considered in INR terms by applying the reference rate of the Reserve Bank of India for USDINR- conversion as on the date on which the issue price is received by the Company. The payment of dividend shall, however, be made by the Company in USD terms by converting the INR amount so arrived at into USD amount by applying the reference rate of the Reserve Bank of India for USDINR- conversion as on the date on which the dividend is paid out by the Company. |
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4. Conversion
4.1 | The Series G CCPS shall be convertible into Equity Shares of the Company at the option of the holders of the Series G CCPS in accordance with paragraph 4.2. Any Series G CCPS that have not been converted into Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | The date which is 20 (twenty) years from the date of the issuance of the Series G CCPS (the Maturity Date) , |
in each case, in accordance with this SHA. Upon occurrence of any of the event under paragraph 4.1(i) and (ii) above the Company (and the Sponsors, where applicable) will immediately follow the procedure under paragraph 4.2 (iv) below.
4.2 | Optional Conversion |
The holders of the Series G CCPS shall have the right, in the events set out in paragraph 4.2 (ii) of this Schedule T after the Proparco Closing Date to require the Company, by a written notice (the Conversion Notice) , to convert all or some of the Series G CCPS into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, GIF, IFC Helion, DEG and FC. In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice.
(i) | Conversion Ratio & Conversion Price |
(a) | The Conversion Ratio for the purposes of Series G CCPS shall be such that each Series G CCPS will convert into such number of Equity Shares, so as to give the Series G CCPS holders the Proparco Required Return -2, without Proparco being required to pay any amount for such conversion. |
For purposes of this paragraph, the term Proparco Required Return -2 for the purposes of the Series G CCPS shall mean (aa) 16% (sixteen percent) IRR; or (bb) 18.4% (eighteen decimal four percent) IRR, in the event of conversion of the Series G CCPS into Equity Shares of the Company (a) in accordance with paragraph 4.1 (i) of this Schedule T, or (b) upon Transfer of the Equity Securities in terms of Clause 6.3.4 of the SHA, or (c) upon a voluntary sale of any or all the Equity Securities held by all the Investors and the voluntary sale of Equity Securities held by the Sponsors to a third party, such that pursuant to the sale of the Equity Securities there is a change in Control on the Company, or (d) upon a Liquidation Event B other than upon Transfer of all or more than 70% (seventy percent) in value of the Companys Assets.
Provided that, if the Series G CCPS holder receives any dividend from the Company prior to conversion, the amount of dividends received by the holders of Series G CCPS will be deducted from the Proparco Required Return -2. It
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is clarified that the amount of dividends for the purposes of preceding sentence shall be considered net of Taxes, i.e. after deducting any Taxes deducted or paid on such dividends by the Company.
(b) | A valuation of the Company to enable conversion of the Series G CCPS in accordance with (a) above shall be: |
1) | for the events specified in paragraph 4.2 (ii) (a), (b) and (g) and paragraph 4.1(ii), the valuation as determined by one of the Big Four Accounting Firms selected in accordance with the procedure laid down in paragraph 4.2(i)(c) below; |
2) | for the events specified in paragraph 4.2(ii) (c), (d), (e) and (f), the valuation as offered by the third party purchaser; and |
3) | for the events specified in paragraph 4.3(i), the valuation per Equity Share (on a fully diluted basis after giving effect to the conversion of all Equity Securities that are convertible to Equity Shares, as provided in the SHA) shall be equal to the initial public offering price of Equity Shares offered for sale/issue of Equity Shares by the Company pursuant to the IPO or QIPO. |
(c) | Proparco shall set out in the Conversion Notice, the names of 2 (two) of the Big Four Accounting Firms that are selected by Proparco for the purpose of paragraph 4.2(i)(b) (1). Within 10 days of the date of the Conversion Notice, GIF, IFC, Helion, FC, DEG, Company and Sponsors shall jointly agree to appoint one of the 2 (two) Big Four Accounting Firms mentioned in the Conversion Notice to do the valuation of the Company, and shall jointly issue a notice to Proparco in this respect. If Proparco does not receive the aforesaid notice within the period of 10 days from the date of the Conversion Notice, then Proparco shall have the right to select, in its sole discretion, one of the 2 (two) Big Four Accounting firms mentioned in the Conversion notice to do the valuation of the Company. |
(ii) | The holders of the Series G CCPS will be entitled to exercise their conversion right in respect of the Series G CCPS just prior to or on the occurrence of the following events: |
(a) | Liquidation Event A or Liquidation Event B as defined in the SHA. |
(b) | Buy-back of the Series G CCPS in accordance with the terms of the SHA. |
(c) | In the event holder of the Series G CCPS wishes to exercise its Co-Sale Right under Clause 6.3.3 (Co Sale Rights) of the SHA. |
(d) | In the event holder of the Series G CCPS wishes to exercise its Co-Sale Right under Clause 6.3.4 (Transfer to a Competitor) of the SHA. |
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(e) | In the event holder of the Series G CCPS wishes to exercise its Drag Along Right under Clause 6.4 (Drag Right to the Investors) of the SHA. |
(f) | In the event holder of the Series G CCPS wishes to exercise its right under Clause 6.5 (Drag Right of IFC, DEG and Proparco) of the SHA. |
(g) | In the event holder of the Series G CCPS wishes to exercise the Deficit Call Option under Clause 6.6 (IFC, DEG and Proparco Call Option) of the SHA. |
(iii) | The conversion Notice shall be dated and shall set forth: |
(a) | The number of Series G CCPS in respect of which the holders of the Series G CCPS are exercising their right to conversion in accordance with this paragraph 4.2; |
(b) | The number of Equity Shares of the Company that the Series G CCPS shall convert into; and |
(c) | The names of 2 of the Big Four Accounting Firms that are selected by Proparco for the purpose of paragraph 4.2(i)(c), if applicable; and the reference valuation as offered by the third party purchaser, if applicable. |
(iv) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(a) | Convening of a meeting of the Board, in which meeting the Company approve the following: |
| The conversion of such number of the Series G CCPS; |
| The cancellation of the certificates representing such number of Series G CCPS that are converted; |
| The issuance and allotment of such number of Equity Shares of the Company that the Series G CCPS shall convert into. |
in each case, as are mentioned in the Conversion Notice;
(b) | Cancellation of the share certificates of the Proparco Series G CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of duly stamped share certificates to the holders of the Series G CCPS to evidence such holders of the Series G CCPS as the owners of the Equity Shares issued upon conversion of such number of the Series G CCPS as are mentioned in the Conversion Notice; |
(c) | Updating its register of members to reflect the holders of the Series G CCPS as the owners of the Equity Shares issued pursuant to the conversion of such number of the Series G CCPS as are mentioned in the Conversion Notice; |
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(d) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provision of this paragraph 4, including without limitation, convening a meeting of the Board to approve the splitting of the share certificates representing the Series G CCPS. |
4.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series G CCPS into Equity Shares based on the conversion price arrived in accordance with paragraph 4.2(i), if at any time after the Proparco Closing Date the Company undertakes an IPO/QIPO, provided that the Shareholders of the Company have consented to such IPO/QIPO in accordance with the SHA. The Series G CCPS shall convert into Equity Shares of the Company immediately prior to the listing of Equity Shares on the Relevant Market pursuant to the IPO/QIPO. |
(ii) | In the event that: |
(a) | The Company files an offer document with the appropriate Authority or Relevant Market in respect of the QIPO or an IPO and, in connection with such filing, such Authority or Relevant Market requires the conversion of the Series G CCPS into Equity Shares of the Company prior to the completion of such IPO or QIPO; and |
(b) | The QIPO or the IPO does not complete on or prior to the Listing Date such that none of the issued, paid-up and subscribed share capital is admitted for trading on a Relevant Market (as defined in the SHA) on or prior to the Listing Date. |
Then such conversion of Series G CCPS into Equity Shares shall be deemed to be a Conforming of Rights and the Company and the Sponsors shall comply with the provisions of Clause 8 (Reinstatement of Rights) of the SHA and shall undertake all necessary actions to ensure that the holders of the Series G CCPS are placed in the same position, and possess the same rights as set forth in this Schedule T, they had the benefit of immediately prior to the occurrence of the event set forth in (a) above.
5. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or a Liquidation Event B with respect to the Company or its Subsidiaries (as defined in the SHA) and in accordance with the terms of the SHA, the holders of the Series G CCPS shall receive the Liquidation Preference in accordance with the terms of the SHA and in the order of precedence set forth in the SHA.
Upon the exercise of the Drag Right of the Investors or Drag Right of IFC, DEG and Proparco in accordance with Clause 6.4 and 6.5 of the SHA, the Series G CCPS shall be subject to the order of preference in terms of the sale of the Equity Securities and the returns on the Equity Securities as set out in the SHA. Notwithstanding the above, the holders of the Series G CCPS will also be entitled to the buy-back preferences in accordance with the terms of the SHA and in order of preference set forth in the SHA.
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For the avoidance of doubt, it is hereby clarified that Equity Shares of the Company held by Proparco pursuant to the conversion of the Series G CCPS shall be treated at par with the remaining Equity Shares of the Company for the purposes of this paragraph 5, save and except where the Series G CCPS are converted into Equity Shares of the Company on or immediately prior and only in connection with Proparco exercising its right in the case of events set out in this paragraph 5, in which case, notwithstanding anything to the contrary contained herein, the Equity Shares issued to the holder of the Series G CCPS will be entitled to priority in terms of payment in the like manner as the Series G CCPS as set out in this paragraph 5.
For the purposes of Clause 4 (Rights of the Investors), Clause 6.4 (Drag Right of the Investors), Clause 6.5 (Drag Right of IFC, DEG and Proparco), Clause 6.6 (IFC, DEG and Proparco Call Option), Clause 6.7 (Sponsors, Helion and FC Call Option), Clause 9 (Buy Back of Equity Securities) and Clause 9A (Buy Back from IFC, DEG and Proparco), the calculation of entitled amounts of the holders of Series G CCPS shall be considered in INR terms by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which the issue price is received by the Company to the Proparco Investment Amount-2. However, to the extent relevant, at the time of payment of amounts to the holders of Series G CCPS in the above mentioned Clauses, the INR entitled amounts arrived at shall be converted into USD amount by applying the reference rate of the Reserve Bank of India for USD-INR conversion as on the date on which such payment is effected and the payment shall thereupon be made in USD amounts.
6. | Transferability |
Subject to the terms of the SHA, the Series G CCPS shall be freely transferable to any person and holders of the Series G CCPS may assign all or any of the Series G CCPS and any rights attaching thereto under the Transaction Documents, without the prior consent of any Person.
7. | Voting Rights |
From and after the issuance of the Series G CCPS, Proparco shall only be entitled to exercise voting rights on every resolution in respect of Schedule M placed before the Company on the basis of its shareholding in the Company on an As if Converted Basis subject to the terms of the SHA. Provided however that upon the transfer of the Series G CCPS in accordance with the terms of the SHA, the transferee of the Series G CCPS will be entitled to vote on every resolution placed before the Company in proportion to the Equity Shares held by such transferee in the share capital of the Company, assuming the transferred Series G CCPS have been converted into Equity Shares of the Company on the basis of the conversion price as determined in paragraph 4.2(i) above.
From the date of conversion of the Series G CCPS, the voting percentage of all the shareholders in the Company shall be in proportion to their shareholding in the Company.
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SCHEDULE U TERMS AND CONDITIONS OF SERIES H CCPS
All capitalized terms used herein but not defined shall have the meaning given to them under the SHA. Reference to a paragraph under this Schedule shall be a reference to the paragraph of this Schedule.
1. | Par Value |
The Series H CCPS shall have the issue price of USD 450.16 (Dollars Four Hundred and Fifty and Sixteen Cents).
2. | Dividend |
Each of the holders of Series H CCPS shall be entitled to receive a dividend of 8% in USD (eight per cent) per annum on a cumulative basis calculated on the issue price paid on each such Series H CCPS. Subject to the Applicable Law, each holder of Series H CCPS shall be individually entitled, in addition and cumulative to the above, to participate in the distribution of the profits of the Company if made to the other shareholders (including the holders of Equity Shares and compulsorily convertible preference shares, but excluding Proparco CCPS) of the Company assuming that all Series H CCPS have been converted to Equity Shares at the Normal Conversion Factor set out below.
Pursuant to the above, it is clarified that the Company shall not declare, pay or set aside any dividends on Shares of any other class or kind of share capital (other than Proparco CCPS) unless the holders of the Series H CCPS first receive a dividend on each Series H CCPS equal to the sum of: (i) 8% in USD (eight per cent) per annum on a cumulative basis calculated on the issue price paid; and (ii) the corresponding dividend that the holders of Series H CCPS would receive if the profits of the Company are distributed to the other Shareholders of the Company.
The dividend pay-out as set out under this paragraph 2 shall be payable in cash or in kind.
3. | Term |
Unless converted in accordance with the terms of this Schedule, the Charter of the Company and the Applicable Laws, the term of the Series H CCPS shall be a maximum of 20 (twenty) years from the date of their issuance.
4. | Voting |
4.1 | The holders of Series H CCPS shall be entitled to attend all meetings of Shareholders of the Company. Series H CCPS shall be entitled to vote on all matters which affect their rights directly or indirectly. The voting rights of each Series H CCPS on every resolution placed before the Company shall, to the extent permissible under the Applicable Law, be in proportion to the share capital that the Series H CCPS represent, assuming that the Series H CCPS have been converted into Equity Shares of the Company on the basis of the Normal Conversion Factor set out below. |
4.2 | From the date of conversion of the Series H CCPS into Equity Shares, the voting percentage of their holders in the Company shall be in proportion to their shareholding in the Company. |
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5. | Conversion |
5.1 | The Series H CCPS shall be convertible into Equity Shares of the Company at any time at the option of the holders of the Series H CCPS in accordance with paragraph 5.2. Any Series H CCPS that have not been converted into the Equity Shares of the Company shall compulsorily convert into the Equity Shares of the Company in accordance with paragraph 5.3 below, upon the earlier of: |
(i) | immediately prior to the listing of the Equity Shares pursuant to the QIPO or IPO, as approved by the Shareholders of the Company; and |
(ii) | the date which is 20 (twenty) years from the date of the issuance of Series H CCPS (the Maturity Date) , |
in each case in accordance with the terms of the Agreement. It is clarified that the Series H CCPS shall convert on the listing of the Equity Shares pursuant to the QIPO or IPO as approved by the Shareholders, if all existing Equity Securities (including the IFC Securities, Helion Securities, FC Securities, DEG Securities, Proparco Securities and the Series G CCPS) convert on or before the date of conversion of the Series H CCPS.
5.2 | Optional Conversion |
(i) | The holders of the Series H CCPS shall severally have the right, at any time and from time to time at their sole option, after their issuance, to require the Company, by written notice (the Conversion Notice) , to convert their respective Series H CCPS into Equity Shares of the Company. A copy of the Conversion Notice shall also be sent to the Sponsors, Proparco, Helion, FC, DEG and IFC, who are the other Shareholders of the Company. |
(ii) | In case the conversion occurs prior to the expiry of the Maturity Date, then the conversion shall be completed within a period of 21 (twenty one) days from the date of the Conversion Notice. |
(iii) | Normal Conversion Factor : The Series H CCPS will be convertible into the Equity Shares of the Company at a conversion ratio of 1:1 (i.e. 1 (one) Series H CCPS will convert into 1 (one) Equity Share), without being required to pay any amount for such conversion, and shall be adjusted for: |
(a) | dividends declared and not paid in accordance with paragraph 2 above; |
(b) | share splits, recapitalization or similar events; |
(c) | the anti-dilution provision as set out in paragraph 9 below; |
(d) | with respect to the CCDs and/or Proparco CCPS that are converted into Equity Shares on or before the conversion of Series H CCPS, the holders of Series H CCPS shall be entitled to an anti-dilution protection such that the conversion ratio of the Series H CCPS is adjusted upwards to ensure that percentage holding of the holders of Series H CCPS after conversion of such CCDs and/or Proparco CCPS shall be same as the percentage holding of the holders of Series H CCPS before the conversion of such CCDs and/or Proparco CCPS determined on a Fully Diluted Basis. |
The Normal Conversion Factor is specified based on the assumption that all
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the existing Equity Securities (including the IFC Securities, Helion Securities, FC Securities, DEG Securities, Proparco Securities and the Series G CCPS) have converted on or before the date of conversion of the Series H CCPS.
(iv) | The Conversion Notice shall be dated and shall set forth: |
(a) | The number of Series H CCPS in respect of which the holders of the Series H CCPS are exercising their right to conversion in accordance with this paragraph 5.2; and |
(b) | The number of Equity Shares of the Company that the Series H CCPS shall convert into. |
(v) | Upon receipt of the Conversion Notice, the Company shall and the Sponsors shall ensure that the Company shall effect the relevant board and shareholders meeting and undertake all such acts and deeds as may be necessary to give effect to the provision of this paragraph 5. |
(vi) | Upon receipt of the Conversion Notice, the Company shall effect the following: |
(e) | Convening of a meeting of the board of directors, in which meeting the Company shall approve the following: |
(A) | the conversion of the relevant Series H CCPS; |
(B) | the cancellation of the share certificates representing such number of the Series H CCPS; and |
(C) | the issuance and allotment of such number of Equity Shares of the Company that the Series H CCPS shall convert into, |
in each case, as are mentioned in the Conversion Notice;
(f) | Cancellation of the share certificates of Series H CCPS in respect of which the conversion right is exercised in the Conversion Notice; and thereafter issuance of share certificates to the holders of Series H CCPS to evidence such holders of the Series H CCPS as the owners of the Equity Shares issued upon conversion of their respective Series H CCPS as mentioned in the Conversion Notice; |
(g) | Making all the requisite filings with the appropriate Authority; |
(h) | The Company and the Sponsors shall do all such acts and deeds as may be necessary to give effect to the provisions of this paragraph 5. |
5.3 | Automatic Conversion |
(i) | The Company shall forthwith convert all the Series H CCPS into Equity Shares, based on the applicable conversion rate as determined in accordance with this paragraph 5.3, if at any time after their issuance, the Company undertakes an IPO/QIPO, provided that the shareholders of the Company have consented to such IPO/QIPO in accordance with the Shareholders Agreement. The Series H CCPS shall convert into Equity Shares of the Company immediately prior to the listing of Equity Shares pursuant to the IPO/QIPO, provided that all the existing Equity Securities (including the IFC Securities, Helion Securities, FC Securities, DEG Securities, Proparco Securities and |
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the Series G CCPS) are converted on or before the date of conversion of the Series H CCPS. For the purpose of this Schedule 6, QIPO means an initial public offering of the Company, which satisfies the following conditions: (i) the initial public offering results in the listing of the Equity Shares on the stock exchange acceptable to the Investor; (ii) the gross proceeds from the issuance of new Equity Shares in such initial public offering is not less than USD 100,000,000 (United States Dollars One Hundred Million); and (iii) the offering price of the Equity Share is based on the pre-money valuation of the Company of at least USD 450,000,000 (United States Dollars Four Hundred and Fifty Million).
(ii) | In the event an IPO/QIPO occurs subsequent to the expiry of the first anniversary of the Subscription Date and prior to the second anniversary of the Subscription Date, the applicable conversion rate for the conversion of the Series H CCPS shall be such that provides the holders of Series H CCPS such number of Equity Shares that is the greater of: (a) the number of Equity Shares which provide holders of Series H CCPS a USD return of 25% per annum on a cumulative basis on the Subscription Price from the Subscription Date till the actual date of conversion of Series H CCPS; the calculation of return shall include any dividend paid before the date of conversion to the holders of Series H CCPS; the valuation of Equity Shares in order to calculate a USD return of 25% per annum on a cumulative basis shall be based on the price at which Equity Shares are allotted to investors in the IPO/QIPO; or (b) the number of Equity Shares received based on the Normal Conversion Factor. |
(iii) | In the event an IPO/QIPO occurs subsequent to the expiry of the second anniversary of the Subscription Date, the applicable conversion rate for the conversion of the Series H CCPS shall be such that provides the holders of Series H CCPS such number of Equity Shares that is the greater of: (a) the number of Equity Shares which provide holders of the Series H CCPS a USD return of 25% per annum on a cumulative basis on the Subscription Price for the period starting from the Subscription Date till the second anniversary of the Subscription Date and a USD return of 18% per annum on a cumulative basis on the Subscription Price after the second anniversary of the Subscription Date till the date of conversion. The calculation of return shall include any dividend paid before the date of conversion, and the valuation of Equity Shares to calculate the return to the holders of Series H CCPS shall be based on the price at which Equity Shares are allotted to investors in the IPO/QIPO; or (b) the number of Equity Shares received based on the Normal Conversion Factor. |
6. | If an IPO/QIPO occurs before the first anniversary of the Subscription Date, the applicable conversion rate for the conversion of the Series H CCPS shall be the Normal Conversion Factor. |
7. | In the event that: |
(a) | the Company initiates the procedure for IPO/QIPO which has necessitated the conversion of the Series H CCPS into the Equity Shares of the Company; and |
(b) | within the Listing Date, the IPO/QIPO does not complete such that the entire issued, paid up and subscribed share capital is not admitted to trading on a Relevant Market by the expiry of the Listing Date, |
then the Company and the Sponsors shall comply with the relevant provisions of the Shareholders Agreement and shall undertake all necessary actions to ensure that the holders of the Series H CCPS are placed in the same position, and possess the same
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rights as set forth in this Schedule, as they had the benefit of, immediately prior to the occurrence of the event set forth in (a) above.
8. | Liquidation Preference |
Upon the occurrence of a Liquidation Event A or Liquidation Event B with respect to the Company or its Subsidiaries and in accordance with the terms of this Agreement, the holders of the Series H CCPS shall receive in preference to the holders of Series A CCPS, Series B CCPS, Series C CCPS, Series D CCPS, Series F CCPS and other Equity Shares of the Company, the sum total of: (i) the amount equal to the total Subscription Price paid by holders of the Series H CCPS for such Series H CCPS; and (ii) an amount that provides the holders of Series H CCPS a return of 8% (eight per cent) in USD per annum on a cumulative basis on such total Subscription Price from the date of issuance of such Series H CCPS till the date of the Liquidation Event A or Liquidation Event B, as reduced by any dividends paid before the occurrence of a Liquidation Event A or Liquidation Event B to the holders of such Series H CCPS. It is clarified that the rights of the holders of the Series H CCPS shall be subordinate to the rights of the holders of the CCDs and Proparco CCPS in relation to the Liquidation Preferences of the Company.
9. | Transferability |
Subject to the terms of this Agreement, the Series H CCPS shall be freely transferable to any Person, and the holders of the Series H CCPS may assign all or any of the Series H CCPS and any rights attaching under the Agreement, without the prior consent of any Person.
10. | Anti-Dilution Protection |
If the Company issues or proposes to issue Equity Securities (New Issuance) to any person at an effective issue price that is less than the subscription price in USD of the Series H CCPS (as adjusted for share splits or similar reorganization of the share capital of the Company), other than the issue of Equity Shares on the conversion of the Equity Securities existing as on the date of subscription of Series H CCPS, then the holders of Series H CCPS shall be entitled to an adjustment to the Normal Conversion Factor based on broad-based weighted average method such that the holders of Series H CCPS receive a higher number of Equity Shares to compensate for the higher subscription price paid for the subscription of Series H CCPS by its holders than the effective issue price of Equity Securities in the New Issuance.
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SCHEDULE V - INSURANCE REQUIREMENTS
| The Company shall, at all times, maintain a directors and officers liability insurance policy for Investors nominee director on the Board of the Company, providing adequate and customary coverage with a financially sound and reputable insurer or insurers. |
| Construction All Risks, based on full contract value and including: |
| Strike, riots and civil commotion |
| Debris removal |
| Extra Expenses |
| Extended Maintenance Period |
| Third Party Liability |
| Marine All Risks (including war) in respect of all transportation of critical items for the project |
| Fire and named perils (including earthquake) or Property All Risks, based on new replacement cost of assets |
| Machinery breakdown |
| All insurances required by local legislation |
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187
188
189
SCHEDULE X - LIST OF RELATED AGREEMENTS
All capitalized terms used herein but not defined shall have the meaning given to them under the Agreement
1. | Transaction Documents; |
2. | APGL Sharing Agreement entered into between IFC, GIF, Proparco, DEG, FC and Helion with respect to distribution of proceeds received by them upon the occurrence of events set out in Clause 4 of the Shareholders Agreement; |
3. | Securities Purchase Agreements dated on or around the date of this Agreement between, inter alia, the Company and each of IFC, Proparco, DEG, FC and Helion for the sale of equity securities of the AZI to the Company; |
4. | IFC Policy Agreement executed between the Company, International Finance Corporation and IFC GIF Investment Company I; and |
5. | Any other document executed pursuant to and/or to give effect to the understanding set out in the above mentioned agreements; and any amendments or modifications to the above mentioned agreements. |
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SCHEDULE Y
Investors |
Series |
Number of
Securities |
Amount (INR) | Year | USD | USD Amount |
Price Per share
(USD) |
|||||||||||||||||
Helion Ventures Partners II LLC and Helion Ventures Partners India - II LLC |
Series A | 2575 | 6,143,048.75 | 2008-09 | 49.23 | 124,776.44 | 48.46 | |||||||||||||||||
Series A | 16810 | 40,102,776.50 | 2008-09 | 45.54 | 814,559.98 | 48.46 | ||||||||||||||||||
Series B | 53887 | 150,159,897.59 | 2009-10 | 45.54 | 3,297,318.79 | 61.19 | ||||||||||||||||||
Series B - Equity | 10 | 27,865.70 | 2009-10 | 45.54 | 611.90 | 61.19 | ||||||||||||||||||
Series C | 114940 | 190,800,400.00 | 2011-12 | 48.65 | 3,921,899.28 | 34.12 | ||||||||||||||||||
Series D | 26636 | 149,987,316.00 | 2012-13 | 55.40 | 2,707,352.27 | 101.64 | ||||||||||||||||||
Series F | 63853 | 716,733,961.75 | 2014-15 | 60.42 | 11,861,583.08 | 185.76 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
1,253,955,266.29 | 22,728,101.74 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
FC India Ventures (Mauritius) Limited |
Series A | 19385 | 46,245,875.80 | 2008-09 | 48.74 | 948,834.43 | 48.95 | |||||||||||||||||
Series B | 53887 | 149,656,593.00 | 2009-10 | 45.41 | 3,295,674.81 | 61.16 | ||||||||||||||||||
Series B - Equity | 10 | 27,773.00 | 2009-10 | 45.41 | 611.61 | 61.16 | ||||||||||||||||||
Series C | 114940 | 190,800,400.00 | 2011-12 | 48.91 | 3,900,891.40 | 33.94 | ||||||||||||||||||
Series D | 53273 | 299,980,263.00 | 2012-13 | 55.39 | 5,415,783.77 | 101.66 | ||||||||||||||||||
Series F | 53973 | 605,833,431.75 | 2014-15 | 61.55 | 9,842,686.12 | 182.36 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
1,292,544,336.55 | 23,404,482.12 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
International Finance Corporation |
Series B | 73272 | 204,177,557.04 | 2009-10 | 45.51 | 4,486,432.81 | 61.23 | |||||||||||||||||
Series B - Equity | 10 | 27,865.70 | 2009-10 | 45.51 | 612.30 | 61.23 | ||||||||||||||||||
Series D | 4439 | 24,996,009.00 | 2012-13 | 54.27 | 460,586.12 | 103.76 | ||||||||||||||||||
Series F | 20307 | 227,940,998.25 | 2014-15 | 61.46 | 3,708,769.90 | 182.64 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
457,142,429.99 | 8,656,401.13 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
International Finance Corporation - CCDS |
CCD-I | 1100000 | 246,618,554.80 | 2010-11 | 45.32 | 5,441,715.68 | 4.95 | |||||||||||||||||
CCD-II | 37500 | 75,000,000.00 | 2012-13 | 54.27 | 1,381,978.99 | 36.85 | ||||||||||||||||||
CCD-III | 36000 | 180,000,000.00 | 2014-15 | 60.17 | 2,991,524.02 | 83.10 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
501,618,554.80 | 9,815,218.69 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
DEG |
CCD | 680390 | 680,390,000.00 | 2011-12 | 50.27 | 13,534,712.55 | 19.89 | |||||||||||||||||
Equity Shares | 10 | 9,720.00 | 2011-12 | 50.27 | 193.36 | 19.34 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
680,399,720.00 | 13,534,905.91 | ||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Proparco |
CCPS (Fixed return) | 140000 | 491,366,400.00 | 2013-14 | 54.24 | 9,058,864.52 | 64.71 | |||||||||||||||||
Equity shares | 10 | 33,920.00 | 2013-14 | 54.24 | 625.37 | 62.54 | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
491,400,320.00 | 9,059,489.89 | ||||||||||||||||||||||
|
|
|
|
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SCHEDULE Z - DISTRIBUTION PERCENTAGE
INTERNATIONAL FINANCE CORPORATION |
15.735 | % | ||
IFC GIF INVESTMENT COMPANY I |
14.535 | % | ||
HELION VENTURE PARTNERS II, LLC |
24.382 | % | ||
HELION VENTURE PARTNERS INDIA II, LLC |
2.2 | % | ||
FC VI INDIA VENTURE (MAURITIUS) LTD |
28.775 | % | ||
SPONSORS* |
14.373 | % |
* | This includes the shareholding of Mr. Satnam Sanghera and Azure Power Inc. |
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption Experts and to the use of our report dated March 1, 2016, in the Registration Statement (Form F-1 No. 333-208584) and related Prospectus of Azure Power Global Limited for the registration of its equity shares.
Ernst & Young Associates LLP
Gurgaon, India
March 1, 2016
Exhibit 99.1
March 1, 2016
VIA EDGAR
Securities and Exchange Commission
Division of Corporation Finance
100 F. Street, N.E.
Washington, D.C. 20549
Attn: | Andrew Blume |
Michael Kennedy |
Mara L. Ransom |
Sondra Snyder |
Re: | Azure Power Global Limited |
Registration Statement on Form F-1 |
Application for Waiver of Requirements of Form 20-F, Item 8.A.4 |
Ladies and Gentlemen:
The undersigned, Azure Power Global Limited, a company incorporated in Mauritius (the Company), is submitting this letter to the Securities and Exchange Commission (the Commission) in connection with the Companys filing on the date hereof of Amendment no. 1 to its Registration Statement on Form F-1 (the Registration Statement) relating to a proposed initial public offering of the Companys equity shares.
The Registration Statement at effectiveness will contain audited U.S. GAAP financial statements for the two years ended March 31, 2015, and unaudited U.S. GAAP financial statements for the nine months ended December 31, 2015 and 2014. Item 8.A.4 of Form 20-F, which is applicable to the Registration Statement pursuant to Item 4(a) of Form F-1, states that because this is the Companys initial public offering (IPO), it must have audited financial statements of a date not older than 12 months from the date of the offering unless a waiver is obtained. See also Division of Corporation Finance, Financial Reporting Manual, Section 6220.3.
Instruction 2 to Item 8.A.4 of Form 20-F provides that the Commission will waive the 12-month age of financial statements requirement in cases where the company is able to represent adequately to us that it is not required to comply with this requirement in any other jurisdiction outside the United States and that complying with this requirement is impracticable or involves undue hardship. See also the Staffs 2004 release entitled International Reporting and
Securities and Exchange Commission
Division of Corporation Finance
March 1, 2016
Page 2
Disclosure Issues in the Division of Corporation Finance (available on the Commissions website at http://www.sec.gov/divisions/corpfin/internatl/cfirdissues1104.htm) at Section III.B.c, in which the Staff notes:
the instruction indicates that the staff will waive the 12-month requirement where it is not applicable in the registrants other filing jurisdictions and is impracticable or involves undue hardship. As a result, we expect that the vast majority of IPOs will be subject only to the 15-month rule. The only times that we anticipate audited financial statements will be filed under the 12-month rule are when the registrant must comply with the rule in another jurisdiction, or when those audited financial statements are otherwise readily available. (emphasis added)
The Company respectfully requests that the Staff of the Commission waive the requirement of Item 8.A.4 of Form 20-F. In connection with this request, the Company represents to the Commission that:
1. | The Company is not currently a public reporting company in any other jurisdiction. |
2. | The Company is not required by any jurisdiction outside the United States to prepare, and has not prepared, consolidated financial statements audited under any generally accepted auditing standards for any interim period. |
3. | Compliance with Item 8.A.4 is impracticable and involves undue hardship for the Company. |
4. | The Company does not anticipate that its audited financial statements for the year ended March 31, 2016, will be available until May 2016 at the earliest. |
5. | In no event will the Company seek effectiveness of the Registration Statement if its audited financial statements are older than 15 months at the time of the offering. |
The Company is filing this letter as an exhibit to the Registration Statement on Form F-1 pursuant to Instruction 2 to Item 8.A.4 of Form 20-F.
Very truly yours,
Azure Power Global Limited |
/s/ Surendra Kumar Gupta |
Name: Surendra Kumar Gupta |
Title: Chief Financial Officer |