ill PAKISTAN STOCK EXCHANGE LIMITED Stock Exchange Building, Stock Exchange … · 2019. 8. 22. ·...

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ill PAKISTAN STOCK EXCHANGE LIMITED Stock Exchange Building, Stock Exchange Road, Karachi-74000 UAN: 111-001-122 SEEKING PUBLIC COMMENTS ON DRAFT PROSPECTUS OF MUGHAL MANUFACTURING MODARABA It is hereby informed to all concerned that Mughal Manufacturing Modaraba has applied for Listing on the Exchange and has submitted the draft Prospectus for issue of shares to the General Public/Retail Investors. The draft Prospectus of the Company is hereby placed on the Website of the Exchange under caption "Public Comments on Draft Prospectus of Mughal Manufacturing Modaraba" for seeking public comments as required under Section 3 (11) of the Public Offering Regulations, 2017 and the Regulation No. 5.2.2 (ac) of Listing of Companies and Securities Regulations of PSX. It is requested to submit written comments on the draft Prospectus, if any, either in hard form or through email at comments.draftprospectuspsx.com.pk addressed to the undersigned latest by March 22, 2018. 2 MuIairnad Ghufran Depity General Manager - Operations Copy to: The Executive Director (PRDD), SMD, SECP NIC Building, Jinnah Avenue, Blue Area, Islamabad. The Director (CI), Public Offering & Regulated Persons Department, SECP The Chief Executive Officer, PSX The Chief Executive Officer, CDC The Chief Executive Officer, NCCPL Acting Chief Regulatory Officer - PSX All Head of Departments - PSX PSX Notice Board & Website Mughal Modaraba Management Limited AKD Securities Limited

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  • ill PAKISTAN STOCK EXCHANGE LIMITED Stock Exchange Building, Stock Exchange Road, Karachi-74000 UAN: 111-001-122

    SEEKING PUBLIC COMMENTS ON DRAFT PROSPECTUS OF MUGHAL MANUFACTURING MODARABA

    It is hereby informed to all concerned that Mughal Manufacturing Modaraba has

    applied for Listing on the Exchange and has submitted the draft Prospectus for issue

    of shares to the General Public/Retail Investors.

    The draft Prospectus of the Company is hereby placed on the Website of the Exchange

    under caption "Public Comments on Draft Prospectus of Mughal Manufacturing

    Modaraba" for seeking public comments as required under Section 3 (11) of the Public

    Offering Regulations, 2017 and the Regulation No. 5.2.2 (ac) of Listing of Companies

    and Securities Regulations of PSX.

    It is requested to submit written comments on the draft Prospectus, if any, either in

    hard form or through email at comments.draftprospectuspsx.com.pk addressed to

    the undersigned latest by March 22, 2018.

    2 MuIairnad Ghufran Depity General Manager - Operations

    Copy to: • The Executive Director (PRDD), SMD, SECP NIC Building, Jinnah Avenue, Blue Area, Islamabad. • The Director (CI), Public Offering & Regulated Persons Department, SECP • The Chief Executive Officer, PSX • The Chief Executive Officer, CDC • The Chief Executive Officer, NCCPL • Acting Chief Regulatory Officer - PSX • All Head of Departments - PSX • PSX Notice Board & Website • Mughal Modaraba Management Limited • AKD Securities Limited

  • DRAFT PROSPECTUS OF MUGHAL MANUFACTURING MODARABA

    MANAGED BY:

    MUGHAL MODARABA MANAGEMENT LIMITED This Public Issue consists of 10,000,000 Modaraba Certificates (40% of the

    Total Paid up Fund) of Rs. 10/- each at par value to the General Public out of the Total Paid up Fund of 25,000,000 Modaraba Certificates

    AS PER REGULATION 3(11) OF THE PO REGULATIONS READ WITH REGULATION 5.2.2. OF PSX’S LISTING OF COMPANIES AND SECURITIES REGULATIONS, THE DRAFT PROSPECTUS WAS PLACED ON THE WEBSITES OF PSX, MUGHAL MANUFACTURING MODARABA AND THE CONSULTANT TO THE ISSUE FOR SEEKING PUBLIC COMMENTS FOR

    SEVEN WORKING DAYS STARTING FROM XXXXXXXXX MONTH/DATE/ 2018 TO MONTH/DATE/ 2018. NO COMMENTS WERE RECEIVED FROM THE GENERAL PUBLIC DURING THIS PERIOD.

    THE SUBSCRIPTION LIST WILL INSHA ALLAH OPEN AT THE COMMENCEMENT OF BANKING HOURS ON MONTH/DATE/2018 AND WILL CLOSE ON MONTH/DATE/2018 AT THE CLOSE OF BANKING HOURS

    CONSULTANT TO THE ISSUE

    BANKERS TO THE ISSUE

    Askari Bank Limited Bank Alfalah Limited* Bank Islami Pakistan Limited

    Dubai Islamic Bank Pakistan Limited Faysal Bank Limited MCB Bank Limited

    Meezan Bank Limited Soneri Bank Limited Summit Bank Limited*

    United Bank Limited*

    *In order to facilitate investors, United Bank Limited (“UBL”), Bank Alfalah Limited (“BAFL”) and Summit Bank (SMBL) are offering electronic submission of application (e-IPO) to their account holders. UBL account holders can use UBL Net Banking to submit their application via link http://www.ubldirect.com/corporate/ebank. BAFL account holders can use BAFL Net Banking to submit their applications via link https://ib.bankalfalah.com.pk. SMBL account holders can use SMBL Net Banking to submit their application via link www.ib.summitbank.com.pk. Furthermore, please note that online applications can be submitted 24 hours a day during the subscription period which will close at midnight on XXXXXX The Central Depository Company of Pakistan (“CDC”) has developed a Centralized e-IPO System (“CES”) through which applications for subscription of securities offered through IPOs can be made electronically. CES has been made available in this IPO which can be accessed through the web link www.cdceipo.com. Payment of subscription money can be made through 1LINK’s member banks available for CES, list of which is available on above website. For making application though CES, investors must be registered with CES. Registration with CES is free of cost and a self-registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), bank account with any of the commercial bank, email address, mobile phone number and CDS Account (Investor Account or sub Account) may register themselves with CES. Investors who do not have CDS account may visit www.cdcpakistan.com for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: 0800 – 23275 (CDCPL) and e-mail: [email protected] For further details on CES, please refer para 2.9 of this prospectus.

    PUBLIC ISSUE UNDERWRITTEN BY AKD Securities Limited

    Dawood Equities Limited

    SHARIAH ADVISOR Mufti Imran Khan

    THE DATE OF PUBLICATION OF THIS PROSPECTUS IS MONTH/DATE/2018

    Jama Punji is an investor education initiative of the Securities and Exchange Commission of Pakistan. Investors are advised to visit www.jamapunji.pk

    Prospectus and Subscription Form can be downloaded from the following websites:

    www.akdsecurities.net | www.mughalsteel.com | www.cdceipo.com

    For further queries you may contact

    Mughal Modaraba Management Limited AKD Securities Limited

    Mr. Muhammad Fahad Hafeez Mr. Tahir Maqsood Mr. Faiz Mehmood Ms. Zainab Abid

    +-92-42-359607941-3 +92-42-35960841-3; +92 21 3537 4292 +92 21 3537 4292

    [email protected] [email protected] [email protected] [email protected]

    ADVICE FOR GENERAL PUBLIC

    GENERAL PUBLIC IS STRONGLY ADVISED IN ITS OWN INTEREST TO CAREFULLY READ THE CONTENTS OF THIS PROSPECTUS, ESPECIALLY THE RISK FACTORS GIVEN AT PARA 5.10 BEFORE MAKING ANY INVESTMENT DECISION.

    SUBMISSION OF FALSE AND FICTITIOUS APPLICATIONS IS PROHIBITED AND SUCH APPLICATIONS’ MONEY MAY BE

    FORFEITED UNDER SECTION 87(8) OF THE SECURITIES ACT, 2015 (THE SECURITIES ACT)

    http://www.akdsecurities.net/http://www.mughalsteel.com/http://www.cdceipo.com/

  • Prospectus – Mughal Manufacturing Modaraba

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    UNDERTAKING BY THE CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER January 12, 2018 WE, MUHAMMAD MUBEEN TARIQ MUGHAL, THE CHIEF EXECUTIVE OFFICER AND MUHAMMAD ZAFAR IQBAL, THE CHIEF FINANCIAL OFFICER OF MUGHAL MANUFACTURING MODARABA, CERTIFY THAT;

    i. THIS PROSPECTUS CONTAINS ALL INFORMATION WITH REGARDS TO THE ISSUER AND THE ISSUE, WHICH IS MATERIAL IN THE CONTEXT OF THE ISSUE AND NOTHING HAS BEEN CONCEALED IN THIS RESPECT;

    ii. THE INFORMATION CONTAINED IN THE PROSPECTUS IS TRUE AND CORRECT TO THE BEST OF

    OUR KNOWLEDGE AND BELIEF; iii. THE OPINIONS AND INTENTIONS EXPRESSED HEREIN ARE HONESTLY HELD; iv. THERE ARE NO OTHER FACTS AND INFORMATION, THE OMISSION OF WHICH MAKES THIS

    DOCUMENT AS A WHOLE OR ANY PART THEREOF MISLEADING;

    v. ALL REQUIREMENTS OF THE MODARABA COMPANIES AND MODARABA (FLOATATION AND CONTROL) ORDINANCE, 1980, SECURITIES ACT, 2015 , THE PUBLIC OFFERING REGULATIONS 2017 AND PSX REGULATIONS FOR LISTING OF COMPANIES AND SECURITIES FOR PREPERATION OF PROSPECTUS, RELATING TO APPROVAL AND DISCLOSURES HAVE BEEN FULFILLED; AND

    vi. NO CHARGES, FEES, EXPENSES, PAYMENTS ETC. HAVE BEEN COMMITTED TO BE PAID TO ANY

    PERSON IN RELATION TO THIS PUBLIC OFFERING EXCEPT FOR THOSE AS DISCLOSED IN PART 3 OF THE PROSPECTUS.

    For and on behalf of Issuer, Mughal Manufacturing Modaraba – Managed by Mughal Modaraba Management Limited

    -Sd- -Sd- ____________________ _____________________ Muhammad Mubeen Tariq Mughal Muhammad Zafar Iqbal Chief Executive Officer Chief Financial Officer Mughal Modaraba Management Limited Mughal Modaraba Management Limited

  • Prospectus – Mughal Manufacturing Modaraba

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    SHARIAH ADVISOR’S CERTIFICATE

  • Prospectus – Mughal Manufacturing Modaraba

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    GLOSSARY OF TECHNICAL TERMS

    Board The Board of Directors of Modaraba Company

    CDA Central Depositories Act, 1997

    CDC Central Depository Company of Pakistan Limited

    CDS Central Depository System

    CES Centralized e-IPO system

    CNIC Computerized National Identity Card

    Commission/ SECP Securities and Exchange Commission of Pakistan

    Companies Act Companies Act, 2017

    CGT Capital Gain Tax

    CVT Capital Value Tax

    CRO Company Registration Office

    e-IPO Electronic IPO

    EPS Earnings per share

    FBR Federal Board of Revenue

    FED Federal Excise Duty

    GOP Government of Pakistan

    ICAP Institute of Chartered Accountants of Pakistan

    IPO Initial Public Offering

    ITO Income Tax Ordinance, 2001

    NOC No Objection Certificate

    PST Punjab Sales Tax

    PKR or Rs. Pakistan Rupees

    PSX / Exchange / Securities Pakistan Stock Exchange Limited Exchange

    Securities Act Securities Act, 2015

    PO Regulations Public Offering Regulations, 2017

    SST Sindh Sales Tax

    TREC Trading Right Entitlement Certificate

    UIN Unique Identification Number

    WHT Withholding Tax

  • Prospectus – Mughal Manufacturing Modaraba

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    DEFINITIONS

    Application Money The amount of money paid along with application for

    subscription of certificates which is equivalent to the product of the Issue Price per certificate and the number of certificates applied for.

    Certificates or Modaraba Certificates of Mughal Manufacturing Modaraba having face Certificate value Rs. 10/-each. e-IPO e‐IPO is submission of application for subscription of securities

    electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e‐IPO. The following two systems are available for e‐IPOs: (i) Centralized e‐IPO System (CES): The Central Depository Company of Pakistan Limited (CDC) has developed a Centralized e‐IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link (www.cdceipo.com). Payment of subscription money can be made through 1LINK’s member banks available for CES, list of which is available on above website. For making application though CES, investors must be registered with CES. Registration with CES is free of cost and a self‐registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), bank account with any of the commercial bank, email address, mobile phone number and CDS Account (Investor Account or sub Account) may registered themselves with CES. Investors who do not have CDS account may visit www.cdcpakistan.com for information and details. For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: 0800 – 23275 (CDCPL) and e‐mail: [email protected] . For further detail on CES, please refer to para 2.8.

    http://www.cdceipo.com/http://www.cdcpakistan.com/mailto:[email protected]

  • Prospectus – Mughal Manufacturing Modaraba

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    (ii) e‐IPO facilities by Bankers to the Issue: Currently, United Bank Limited (UBL), Summit Bank Limited (SMBL) and Bank Alfalah (BAFL) are providing e‐IPO facilities to their respective accountholders. UBL account holders can use UBL Net Banking to submit their application via link http://www.ubldirect.com/corporate/ebank SMBL account holders can use SMBL Net Banking to submit their application via link https://ib.summitbank.com.pk , and BAFL account holders can use BAFL Net Banking to submit their application via link: https://ib.bankalfalah.com.pk Investors who are registered with CES or account holders of UBL, SMBL or BAFL can submit their applications through the above mentioned links 24 hours a day during the subscription period which will close at midnight on _______.

    General Public All Pakistani Individual and Institutional Investors including resident and non-resident Pakistani’s as well foreign investors.

    Issuer Mughal Manufacturing Modaraba. Issue Initial Public Offering of 10,000,000 Modaraba Certificates of

    Mughal Manufacturing Modaraba (40% of the Total Paid Up Fund of the Modaraba) at issue price of Rs. 10/- per certificate.

    Issue Price The price at which Certificates are being offered i.e. is Rs.10/-

    per certificate. Listing Committee Listing Committee means PSX’s listing committee which has

    approved prospectus and listing application of the Modaraba. Listing Regulations Chapter 5 of the Rule Book of the Pakistan Stock Exchange

    Limited, titled ‘Listing of Companies and Securities Regulation’. Modaraba Ordinance or Ordinance The Modaraba Companies and Modaraba (Floatation and

    Control) Ordinance, 1980. Modaraba Rules The Modaraba Companies and Modaraba Rules, 1981 Modaraba or MMM Mughal Manufacturing Modaraba Modaraba Management Company or Mughal Modaraba Management Limited

    http://www.ubldirect.com/corporate/ebankhttps://ib.summitbank.com.pk/https://ib.bankalfalah.com.pk/

  • Prospectus – Mughal Manufacturing Modaraba

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    Management Company or Modaraba Company Prospectus Prospectus means the prospectus of the Modaraba for offer of

    its Certificates to the public. Registrar or Registrar Modaraba Registrar of the Modaraba Companies and Modaraba Regulations / PO Regulations The Public Offering Regulations, 2017 Religious Board Means the Board constituted by the Federal Government as

    per section 9 of the Modaraba Ordinance. The religious board certifies in writing that the Modaraba’s business is not a business opposed to the Injunctions of Islam.

    Sponsor Means Mughal Holding (Private) Limited and the Modaraba

    Management Company Limited who have contributed to 60% of the paid up fund of this Modaraba as detailed in Para 2.7 of this prospectus.

    Shariah Compliant Business A business which meets all of the requirements of Shariah Law

    and the principles articulated for “Islamic Finance”. Standard Scale Standard Scale as defined in Section 479 of Companies Act Interpretation: ANY CAPITALIZED TERM CONTAINED IN THIS PROSPECTUS, WHICH IS IDENTICAL TO A CAPITALIZED TERM DEFINED HEREIN, SHALL, UNLESS THE CONTEXT EXPRESSLY INDICATES OR REQUIRES OTHERWISE AND TO THE EXTENT AS MAY BE APPLICABLE GIVEN THE CONTEXT, HAVE THE SAME MEANING AS THE CAPITALIZED/DEFINED TERM PROVIDED HEREIN.

  • Prospectus – Mughal Manufacturing Modaraba

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    OF CONTENTS TABLE OF CONTENTS

    1. APPROVALS, CONSENTS AND LISTING ON THE SECURITIES EXCHANGE

    09

    2. VALUATION, MODARABA FUND AND RELATED MATTERS

    17

    3. UNDERWRITING ARRANGEMENT, BROKERAGE & OTHER EXPENSES TO THE ISSUE

    32

    4. THE MODARABA MANAGEMENT COMPANY

    34

    5. MODARABA OBJECTIVES, BUSINESS AND PROSPECTS

    35

    6. FINANCIAL INFORMATION

    43

    7. BOARD OF DIRECTORS AND ORGANIZATIONAL SET UP

    50

    8. MISCELLANEOUS

    58

    9. APPLICATION AND ALLOTMENT INSTRUCTIONS

    63

    10. SIGNATORIES TO THE PROSPECTUS

    70

    11. MEMORANDUM OF ASSOCIATION OF MUGHAL MODARABA MANAGEMENT LIMITED

    71

    12. APPLICATION FORM 78

  • Prospectus – Mughal Manufacturing Modaraba

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    1 APPROVALS, CONSENTS AND LISTING ON THE SECURITIES EXCHANGE

    1.1 APPROVAL OF THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

    Approval of the Securities and Exchange Commission of Pakistan (the “Commission”) or (the

    “SECP”) as required under Section 87(2) of the Securities Act, 2015 (the “Securities Act”) read

    with Section 88(1) thereof has been obtained by the Mughal Manufacturing Modaraba (the

    “Modaraba”) for issue, circulation and publication of this prospectus vide their letter No.

    ______ dated _____.

    DISCLAIMER: IT MUST BE DISTINCTLY UNDERSTOOD THAT IN GIVING THIS APPROVAL, SECP DOES NOT TAKE

    ANY RESPONSIBILITY FOR THE FINANCIAL SOUNDNESS OF THE MODARABA AND ANY OF ITS

    SCHEMES STATED HEREIN OR FOR THE CORRECTNESS OF ANY OF THE STATEMENTS MADE OR

    OPINIONS EXPRESSED WITH REGARD TO THEM BY THE ISSUER AND/OR THE MODARABA

    COMPANY IN THIS PROSPECTUS.

    SECP HAS NOT EVALUATED QUALITY OF THE ISSUE AND ITS APPROVAL FOR ISSUE,

    CIRCULATION AND PUBLICATION OF THE PROSPECTUS SHOULD NOT BE CONSTRUED AS ANY

    COMMITMENT OF THE SAME. THE PUBLIC/INVESTORS SHOULD CONDUCT THEIR OWN

    INDEPENDENT DUE DILIGENCE AND ANALYSIS REGARDING THE QUALITY OF THE ISSUE

    BEFORE SUBSCRIBING.

    THE COMMISSION NEITHER TAKES RESPONSIBILITY FOR THE CORRECTNESS OF THE CONTENTS

    OF THIS PROSPECTUS NOR THE ABILITY OF THE COMPANY TO FULFILL ITS OBLIGATIONS

    THEREUNDER.

    1.2 AUTHORIZATION FOR THE ISSUE FROM REGISTRAR MODARABA Authorization has been granted under the Modaraba Ordinance for the floatation of the Modaraba vide Registrar Modaraba’s Authorization Certificate bearing No. SCD/M/PRDD/MMM/2017-268 dated December 14, 2017. The Religious Board constituted under Section 9 of the Modaraba Ordinance has certified that the business proposed to be undertaken by the Modaraba is not opposed to the injunctions of Islam.

    1.3 APPROVAL OF THE PROSPECTUS BY PSX

    The Prospectus of the Modaraba has been approved by PSX vide its letter No. ___ dated ____

    in accordance with the requirements of it’s Listing Regulations.

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    DISCLAIMER:

    PSX HAS NOT EVALUATED THE QUALITY OF THE ISSUE AND ITS APPROVAL SHOULD NOT BE

    CONSTRUED AS ANY COMMITMENT OF THE SAME. THE PUBLIC / INVESTORS SHOULD

    CONDUCT THEIR OWN INDEPENDENT INVESTIGATION AND ANALYSIS REGARDING THE

    QUALITY OF THE ISSUER BEFORE SUBSCRIBING.

    THE PUBLICATION OF THIS DOCUMENT DOES NOT REPRESENT SOLICITATION BY PSX.

    THE CONTENTS OF THIS DOCUMENT DO NOT CONSTITUTE AN INVITATION BY PSX TO INVEST

    IN MODARABA CERTIFICATES OR SUBSCRIBE FOR ANY SECURITIES OR OTHER FINANCIAL

    INSTRUMENT, NOR SHOULD IT OR ANY PART OF IT FORM THE BASIS OF, OR BE RELIED UPON

    IN ANY CONNECTION WITH ANY CONTRACT OR COMMITMENT WHATSOEVER OF THE PSX.

    IT IS CLARIFIED THAT INFORMATION IN THIS PROSPECTUS SHOULD NOT BE CONSTRUED AS

    ADVICE ON ANY PARTICULAR MATTER BY PSX AND MUST NOT BE TREATED AS A SUBSTITUTE

    FOR SPECIFIC ADVICE.

    PSX, DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM OR

    IN RELIANCE UPON THIS DOCUMENT TO ANYONE, ARISING FROM ANY REASON, INCLUDING,

    BUT NOT LIMITED TO, INACCURACIES, INCOMPLETENESS AND / OR MISTAKES, FOR DECISIONS

    AND /OR ACTIONS TAKEN, BASED ON THIS DOCUMENT.

    PSX NEITHER TAKES RESPONSIBILITY FOR THE CORRECTNESS OF CONTENTS OF THIS

    DOCUMENT NOR THE ABILITY OF THE ISSUER TO FULFILL ITS OBLIGATIONS THEREUNDER.

    ADVICE FROM A SUITABLY QUALIFIED PROFESSIONAL SHOULD ALWAYS BE SOUGHT BY

    INVESTORS IN RELATION TO ANY PARTICULAR INVESTMENT.

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    1.4 FILING OF THE PROSPECTUS WITH REGISTRAR MODARABA

    The Modaraba Company, as required under Rule 20(2) of the Modaraba Rules, has filed with the Registrar Modaraba a copy of this Prospectus signed by all the Directors of the Modaraba Company.

    1.5 LISTING AT PSX

    Application has been made to PSX for permission to deal in and for quotation of the Certificates of the Modaraba.

    If for any reason the application for formal listing is not accepted by PSX or approval for formal listing is not granted by PSX before the expiration of twenty-one days from the date of closing of the subscription period / list or such longer period not exceeding forty-two days as may, within the said twenty-one days, be notified to the applicants for permission by the securities exchange, the Issuer undertakes that a notice to that effect will immediately be published in the press and will refund application money to the applicants without surcharge as required under the provisions of the section 69 of the Companies Act.

    If any such money is not repaid within eight (08) days after the issuer becomes liable to repay it, the Directors of the Company shall be jointly and severally liable to repay that money from the expiration of the eight day together with surcharge at the rate of two per cent (2.0%) for every month or part thereof from the expiration of the eight day and, in addition, shall be liable to a penalty of level 3 on the standard scale in accordance with the provisions of sub-section (2) of Section 69 of the Companies Act.

    As required under sub-section (3) of Section 69 of the Companies Act, the Application Money shall be deposited and kept in a separate bank account in a scheduled bank so long as the issuer may become liable to repay it under sub-section (2) of Section 69 of the Companies Act; and, if default is made in complying with the said sub-section (3), the issuer and every officer of the issuer who authorizes or permits the default shall be liable to a penalty of level 2 on the standard scale as prescribed in the Companies Act.

    However, the issuer is determined to refund the subscription money on time without any delay. Surcharge paid in case of delayed payment is considered Riba according to Shariah Injunctions.

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    1.6 CONDITIONS IMPOSED BY REGISTRAR MODARABA ON MODARABA MANAGEMENT

    COMPANY

    While granting registration to the Modaraba Company, the Registrar Modaraba has imposed the following conditions, inter-alia:

    i. Mughal Modaraba Management Limited (“the Company”) shall make such investments

    as may be required in terms of the prospectus for floatation of a Modaraba. ii. Subscription in compliance to Section 17(3) of Ordinance, will be in the nature of

    permanent investment of the Company in the Modaraba free from encumbrances for all time, which will not be disinvested during the life of the Modaraba.

    iii. The Company shall undertake such business as is approved by the Registrar in terms of

    the Prospectus. iv. The promoters, sponsors or persons holding controlling interest shall not transfer

    any shares held by them without the prior permission in writing of the Registrar. v. The Company shall furnish its annual audited accounts along with the Directors’ Report

    to the Registrar immediately on issue of the same to the shareholders. vi. An amount of not less than Rs. 2.5 million shall be set aside apart free from any

    encumbrance in respect of each Modaraba to be floated and managed by the Company and that the particulars thereof shall be furnished to the Registrar along with the application for floatation of each Modaraba.

    vii. No change shall be made in the Company’s major shareholders as well as Chief

    Executive/Directors without the prior approval of the Registrar.

    viii. The Company shall not engage itself in any business except the floatation and management of Modaraba, unless it has raised the Paid-up Capital as prescribed by the Modaraba Companies and Modaraba Rules, 1981.

    ix. The promoters/major shareholders of the Company shall deposit their shares (D-mat

    form) in a blocked account at the Central Depository Company of Pakistan Limited (CDC). Any subsequent allotment/subscription, either in the form of right or bonus shares or in any other manner whatsoever, to the existing Modaraba Company’s promoters/major shareholders shall also be deposited with the CDC.

    x. The promoters/major shareholders of the Company shall not raise any financing or create

    encumbrance against the shares mentioned in preceding condition. xi. The company shall not raise deposit in any form from the public or any institution. xii. The Company shall not undertake any real estate business activity without the prior

    written approval of the Registrar and Securities and Exchange Commission of Pakistan.

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    xiii. The Chief Executive Officer or one of the directors of the Company shall have sound knowledge or working experience in the area of Islamic banking and finance and/or appoint at least one director or chief executive officer having hands on experience with Islamic banking and finance.

    xiv. The Company shall float a Modaraba within one year from the date of its registration. xv. In the case of removal of its Chief Executive before the expiration of his/her term or where

    the chief executive decides to tender his resignation, the Company shall inform the Registrar at least one month before the change upon receipt of advance notice for resignation from the chief executive. The Company shall appoint a new chief executive within time prescribed under the law and seek approval of the Registrar within thirty days from the date of the office of Chief Executive has fallen vacant. In the ordinary course of business, the Company shall not relieve the outgoing chief executive unless a new incumbent is appointed to takeover charge from him/her. However, in the case of removal of the chief executive before the expiration of his/her term, the Company shall also furnish reasons for such removal/termination to the Registrar while conveying the information of change in the management.

    1.7 CONDITIONS IMPOSED BY REGISTRAR MODARABA ON THE MODARABA:

    While granting approval for the floatation of the Modaraba vide their Modaraba authorization certificate dated December 14, 2017, the Registrar Modaraba has prescribed the following conditions, inter-alia: 1. Mughal Manufacturing Modaraba (“the Modaraba”) shall be floated within twelve

    months from the date of this authorization.

    2. The Modaraba shall not undertake any business other than those specified in the

    prospectus.

    3. Mughal Modaraba Management Limited (‘the Modaraba Company”) shall not disinvest or create encumbrance in favor of any person on any part of the investment in the Modaraba.

    4. The Modaraba Certificates shall be listed for trading on the Stock Exchange.

    5. If the application for listing of the Modaraba is refused by the Stock Exchange, the

    Modaraba Company shall forthwith repay the money received by it from the applicants in a manner as prescribed in the Modaraba Companies and Modaraba Rules, 1981.

    6. Dates of execution of material contracts shall be incorporated in the Prospectus and

    verified photo copies thereof submitted to the Registrar before issue/publication of the Prospectus.

    7. Dates of opening and closing of subscription lists as agreed by the Stock Exchange shall

    be incorporated in the prospectus. If these dates go beyond three months of the date of this certificate, the prospectus shall be required to be cleared afresh by the Registrar before publication.

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    8. A duly signed final copy of the Prospectus containing original certificate of the auditors shall be filed with the Registrar before issue/publication of the Prospectus.

    9. The prospectus shall be published in the press not less than seven days and not more than

    thirty days before the date on which subscription list will open. 10. Five published copies of the Prospectus along with copies of all newspaper in which

    Prospectus has been advertised shall be filed with the Registrar within seven days of its publication.

    11. The contents of the Prospectus shall not be altered without prior written approval of the

    Registrar. 12. The Modaraba Company shall take a decision within ten days of the closure of

    subscription list as to which applications have been accepted, and shall refund, within ten days of the decision, the application money to the applicants whose applications have not been accepted.

    13. A report about the public offer and subscription, allotment basis, fulfillment of

    underwriting obligations and related matters shall be furnished to the Registrar within two months of the date of publication of the Prospectus.

    14. The Modaraba Certificates to be subscribed by the Modaraba Company and/or sponsors

    of the Modaraba Company, shall not be transferred except with the prior written authorization of the Registrar.

    15. The Modaraba shall not undertake any real estate business activity without the prior

    written approval of the Registrar. 16. The Modaraba shall not raise finances of any kind from the public, except with the prior

    approval of the Registrar. 17. The Modaraba Company shall comply with the conditions, if any, imposed by the

    Securities and Commission of Pakistan in the consent order. 18. The Modaraba Company shall file all the periodic returns/statements as required and

    prescribed under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Rules and Regulations framed thereunder.

    19. The Modaraba Company shall not engage in any business, which is of the same nature

    and competes with the business of the Modaraba. 20. The objects outlined in the prospectus shall be achieved and the business operation

    conducted on the basis of business arrangements and agreements as already approved by the Religious Board. In case any new arrangement is to be entered into, approval of the Religious Board shall be obtained.

    21. Future business plans, scheme, prospectus, expected rate of return and mode of

    distribution of profit etc. shall be filed with Registrar within seven days, after a decision is made by Board of Directors, for further issue of Modaraba Certificates.

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    22. The business of the Modaraba shall be conducted in line with the provisions of the

    Modaraba Companies and Modaraba (Floatation and Control) Ordinance,1980 and the Rules and Regulations framed thereunder, the Prospectus of the Modaraba and the Shariah Audit and Shariah Compliance Mechanism for the Modarabas.

    23. The Modaraba shall appoint its auditor, with prior approval of the Registrar, from the

    panel of auditors circulated by the Registrar. 24. Any violation of the condition of Authorization Certificate or Prospectus of the Modaraba

    shall be cognizable under the Modaraba Companies and Modaraba (Floatation and Control) ordinance, 1980.

    25. The promoters/major certificate holders of the Modaraba shall place their modaraba

    certificates in a blocked account at the Central Depository Company of Pakistan limited (CDC). Any subsequent allotment/subscription, either in the form of right or bonus modaraba certificates or in any other manner whatsoever, to the existing promoters/major certificates holders of the Modaraba shall also be deposited with CDC.

    26. Any other condition imposed by the Registrar Modaraba from time to time.

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    1.8 CERTIFICATE BY CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER OF THE ISSUER

    January 12, 2018 The Chief Executive Pakistan Stock Exchange Limited Stock Exchange Building Stock Exchange Road Karachi

    We being the Chief Executive Officer and Chief Financial Officer of the Issuer accept absolute responsibility for the disclosures made in this Prospectus. We hereby certify that the Prospectus contains all necessary information with regard to the Issuer and the Issue and constitutes full, true and plain disclosures of all material facts relating to the Modaraba Certificates being offered through this Prospectus and that nothing has been concealed. The information contained in this Prospectus is true and correct to the best of our knowledge and the opinions and intentions expressed herein are honestly held. There are no other facts, the omission of which makes this Prospectus as a whole or any part thereof misleading.

    For and on behalf of Issuer, Mughal Manufacturing Modaraba – Managed by Mughal Modaraba Management Limited

    -Sd- -Sd-

    ____________________ _____________________ Muhammad Mubeen Tariq Mughal Muhammad Zafar Iqbal Chief Executive Officer Chief Financial Officer Mughal Modaraba Management Limited Mughal Modaraba Management Limited

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    2 VALUATION, MODARABA FUND AND RELATED MATTERS

    2.1 VALUATION SECTION

    The Modaraba Certificates of Mughal Manufacturing Modaraba are being issued at par value of Rs. 10/- per certificate without any premium. The Public Issue at par value is based on the following factors: (a) Out of the total paid up fund of the Modaraba of Rs. 250,000,000/-, the Management

    Company and Mughal Holding (Private) Limited, being the sponsors, have subscribed Rs. 150,000,000 at par value of Rs. 10/- per certificate as detailed in para 2.7 of this prospectus.

    (b) The Registrar Modaraba has also approved the prospectus for present issue to the general

    public at par value of Rs. 10/- each vide its letter No. SCD/M/PRDD/MMM/2017-268 dated December 14, 2017.

    (c) The Modaraba has not yet commenced its operations and the breakup value of its

    certificates at present is Rs. 10/- per certificate.

    (d) The Consultant to the Issue has reviewed the business plan of the Modaraba and in their

    opinion the issue price of Rs. 10/- per certificate is justified based on:

    Strong Sponsor/Group Profile

    The sponsors of the Modaraba and Mughal Group have been engaged in the industry for over a decade with a tremendous track record and repute. The Mughal Group commands strong management prowess with a track record of successful business operations. Mughal Iron & Steel Industries (“MISIL”) is one of the Associated Companies which is also listed on Pakistan Stock Exchange. MISIL carries a strong brand name and has a considerable footprint in the market of Long Rolled Steel products.

    In addition Mughal Steel Metallurgies Corporation Limited (“MSMCL”), also an Associated Company of the Modaraba by virtue of common directorship operates a small section re-rolling mill. MSMCL had posted profitable operations despite the limited working capital it has. Under the new arrangement, the Modaraba shall rent the assets of MSMCL for a minimum period of 10 years for the purpose of manufacturing and sale of T-Iron. The Modaraba will benefit from an already established clientele and strong group profile. The Sponsors have already established a very strong client base for girders through their Associated Company Mughal Iron & Steel Industries Limited, where almost 100,000 MT of Steel girder is sold annually. Since Steel girder and T-iron have same client base therefore, the existing clientele is available to ensure the achievement of assumed quantity being produced and sold.

    Steel demand to remain robust

    Pakistan’s steel consumption has grown at a staggering 5 year CAGR of 25.9% per annum between 2012 and 2016. Pakistan’s steel use in 2016 was 7.6 Mn tons translating into ~39.5 kg per capita.1 Going forward, Pakistan’s steel requirement is much lower than that of its N-11 peer countries like Egypt (122.1 kg per capita), Mexico

    1 Steel Statistical Yearbook 2017-Apparent Steel Use per Capita (finished goods equivalent)

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    (199.1 kg per capita), Vietnam (236.1 kg per capita) and Indonesia (48.5 kg per capita). The demand is expected to swell on the back of improved macro-economic conditions

    and strong infrastructure and development spending.

    With real GDP growth projected above 5.5% over the next two years (FY18E 5.50% and

    FY19E 5.80%)2 and enhanced private and public sector spending on housing and

    infrastructure demand for construction materials including steel is likely to remain

    strong.

    World Steel Association (2017)

    Back log of housing units shortage and increased housing demand will keep demand of construction materials high:

    The World Bank in its Pakistan Housing Finance Project report (114473) has highlighted the shortfall in housing units to be around 10 million units. The estimated new housing units built every year stand at 100,000-350,000 formal units while demand stands around 400,000-700,000 units. This has been largely on the back of expected increase in urban population which is expected to be around 2.3 million per year over the next 20 years translating into 360,000 households per year (based on an average household size of 6.5 individuals per household). That said demand for construction materials including cement and steel is likely to remain strong.

    Justification

    Based on the above the Consultant to the Issue is of the opinion that the Issue price of Rs. 10/- per certificate is justified.

    2 World Bank Staff Estimates –Pakistan Development Update (Nov 2017)

    2599

    1917 2097 1738

    25513030

    3368

    4530

    6076

    7633

    2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

    Apparent Steel Use-Finished ('000 M.T.)

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    2.2 POST ISSUE FREE FLOAT IN TERMS OF THE NUMBER OF CERTIFICATES AND PERCENTAGE

    Based upon the number of certificates being offered to general public, the post issue free float in terms of number of certificates and percentage will be as follows:

    Sr. No Description Number of Certificates Percentage

    1 General Public 10,000,000 40%

    2.3 CONSULTANT TO THE ISSUE

    AKD Securities Limited has been appointed by the Issuer as Consultant to this Issue. The SECP vide its License No.CTI/09 dated December 29, 2017, as required under Public Offering (Regulated Securities Activities Licensing) Regulations, 2017 (the “POL Regulations”), has granted license to AKD securities as Consultant to the Issue.

    2.4 INTEREST OF CONSULTANT TO THE ISSUE OTHER THAN THEIR ROLE AS CONSULTANT

    The Consultant to the Issue is deemed to be interested to the extent of fees payable to it by the Issuer for the services as Consultant and as Underwriter. The Consultant to the Issue has no other interest in any property or profits of the Modaraba.

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    2.5 STATEMENT BY THE ISSUER

    January 12, 2018 The Chief Executive Pakistan Stock Exchange Limited Stock Exchange Building Stock Exchange Road Karachi

    On behalf of Mughal Manufacturing Modaraba (the “Modaraba”), we hereby confirm that all material information as required under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, the Securities Act, 2015, the Public Offering Regulations, 2017 and the Listing of Companies and Securities Regulations of the Pakistan Stock Exchange Limited has been disclosed in the Prospectus and that whatever is stated in Prospectus and the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.

    For and on behalf of Mughal Manufacturing Modaraba Managed by Mughal Modaraba Management Limited

    -Sd- -Sd-

    ____________________ _____________________ Muhammad Mubeen Tariq Mughal Muhammad Zafar Iqbal Chief Executive Officer Chief Financial Officer Mughal Modaraba Management Limited Mughal Modaraba Management Limited

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    2.6 STATEMENT BY THE CONSULTANT TO THE ISSUE

    February 27, 2018 The Chief Executive Pakistan Stock Exchange Limited Stock Exchange Building Stock Exchange Road Karachi

    Dear Sir, Being mandated as the consultant to this Initial Public Offering of Mughal Manufacturing Modaraba (the “Modaraba”), we hereby confirm that all material information as required under the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, the Securities Act, 2015, the Listing of Companies and Securities Regulations of the Pakistan Stock Exchange Limited and the Public Offering Regulations, 2017 has been disclosed in this Prospectus and that whatever is stated in Prospectus and in the supporting documents is true and correct to the best of our knowledge and belief and that nothing has been concealed.

    For and behalf of AKD Securities Limited,

    -Sd- ____________________ Faiz Mehmood, Associate, Investment Banking

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    2.7 MODARABA FUND

    Number of Certificates

    Amount in Rs.

    AUTHORIZED MODARABA FUND

    30,000,000 Modaraba Certificates of Rs. 10/- each 300,000,000

    SUBSCRIBED & PAID UP FUND

    2,500,000

    Modaraba Certificates of Rs. 10/-each fully paid in cash by: Modaraba Management Company Mughal Modaraba Management Limited (10%)

    25,000,000

    12,500,000

    Other Sponsors Mughal Holding (Private) Limited (50%)

    125,000,000

    15,000,000 Sub-Total (60%) 150,000,000

    Present Issue

    10,000,000

    Now offered for subscription at par in cash, by full payment on application, as follows: General Public (40%)

    100,000,000

    10,000,000 Sub-Total (40%) 100,000,000

    25,000,000 Grand Total (100%) 250,000,000

    Notes:

    I. As per section 17(3) of the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980, the Modaraba Management Company will hold not less than 10% of the total amount of Modaraba Certificates offered for subscription.

    II. As per rule 3 (iv) of the Companies (Issue of Capital) Rules, 1996, and regulation 5(1) of the PO Regulations, the sponsors shall retain their entire shareholding in the Modaraba for a period of not less than 12 months from the last date of public subscription or from the date of commencement of the business of the Modaraba, which-ever is later.

    III. Further, as per rule 3 (v) of the Companies (Issue of Capital) Rules, 1996, and regulation 5(2) of the PO Regulations, the sponsors shall retain not less than twenty-five percent (25%) of the capital of the Modaraba for not less than three financial years from the last date of public subscription or from the date of commencement of the business of the Modaraba, which-ever is later.

    IV. As per regulation 5(3) of the PO Regulations, the certificates of the sponsors mentioned at (II) and (III) above shall be kept unencumbered in a block account with central depository company.

    V. Subject to compliance with (II) and (III) above, and with the approval of the securities exchange, the sponsors of the issuer may sell their certificate holding through block-sale to any other person who shall be deemed sponsor for the purpose of the Companies (Issue of Capital) Rules, 1996 and the PO Regulations.

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    VI. The Commission vide its letter SMD/CIW/SA-88/01/2018 dated February 08, 2018 and the

    Pakistan Stock Exchange vide their letter PSX/GEN-720 dated February 6, 2018 have allowed relaxation from the requirement of regulation 5.4.4 of the Listing of Companies and Securities Regulations of the PSX regarding the allocation of capital of forty percent (40%) to the public instead of requirement of seventy percent (70%) of the total size of the Modaraba.

    2.8 OPENING AND CLOSING OF THE SUBSCRIPTION LIST The subscription list will open at the commencement of banking hours at 9:00 a.m. on XXX, 2018 and will close on XXX, 2018 at the close of banking hours at 5:00 pm. Please note that online applications can be submitted 24 hours during the subscription period which will close at 12:00 midnight on XXX, 2018. The procedure of making online applications is given herein below.

    2.9 PUBLIC SUBSCRIPTION THROUGH e-IPO

    e‐IPO is submission of application for subscription of securities electronically through internet, Automated Teller Machines (ATM) and mobile phones. In order to facilitate the public during IPOs, SECP has introduced the concept of e‐IPO. The following two systems are available for e‐IPOs: (i) Centralized e‐IPO System (CES):

    The Central Depository Company of Pakistan Limited (CDC) has developed a Centralized e‐IPO System (CES) through which applications for subscription of securities offered to the general public can be made electronically. CES has been made available in this IPO and can be accessed through the web link (www.cdceipo.com). Payment of subscription money can be made through 1LINK’s member banks available for CES, list of which is available on above website. For making application though CES, investors must be registered with CES. Registration with CES is free of cost and a self‐registration process by filling the CES registration form, which is available 24/7 all around the year. Investors who have valid Computerized National Identity Card (CNIC), bank account with any of the commercial bank, email address, mobile phone number and CDS Account (Investor Account or sub Account) may register themselves with CES. Investors who do not have CDS account may visit www.cdcpakistan.com for information and details.

    For further guidance and queries regarding CES and opening of CDS account, investors may contact CDC at phone Number: 0800 – 23275 (CDCPL) and e‐mail:[email protected]

    http://www.cdceipo.com/http://www.cdcpakistan.com/

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    (ii) e‐IPO facilities by Bankers to the Issue:

    Currently, United Bank Limited (UBL), Summit Bank Limited (SMBL) and Bank Alfalah (BAFL) are providing e‐IPO facilities to their respective accountholders. UBL account holders can use UBL Net Banking to submit their application via link http://www.ubldirect.com/corporate/ebank SMBL account holders can use SMBL Net Banking to submit their application via link https://ib.summitbank.com.pk and BAFL account holders can use BAFL Net Banking to submit their application via link: https://ib.bankalfalah.com.pk Investors who are registered with CES or account holders of UBL, SMBL and BAFL can submit their applications through the above mentioned links 24 hours a day during the subscription period which will close at midnight on XX/XX/XXXX.

    2.10 BENEFITS OF e-IPO

    e-IPO has the following benefits:

    i. It enables the investors to make application for subscription of Modaraba certificates through the internet without going to the bank, and waiting in long queues.

    ii. It is efficient and simultaneously facilitative for both the Issuer and the investors.

    iii. It is available for use 24 hours during the subscription period.

    iv. If you are registered with CES or accountholder of a bank providing e-IPO facility, you may get SMS for new IPOs.

    v. By applying through CES you can also track your application status. 2.11 ELIGIBILITY OF INVESTORS FOR INVESTMENT IN THIS ISSUE

    Eligible investors include: i. Pakistani citizen resident in or outside Pakistan or persons holding two nationalities

    including Pakistani Nationality; ii. Foreign nationals whether living in or outside Pakistan;

    iii. Companies, bodies corporate or other legal entities incorporated or established in or outside Pakistan (to the extent permitted by their respective constitutive documents and existing regulations, as the case may be);

    iv. Mutual Funds, Provident / Pension / Gratuity Funds / Trusts (subject to the terms of their respective Trust Deeds and existing regulations); and

    v. Branches in Pakistan of companies and bodies corporate incorporated outside Pakistan.

    http://www.ubldirect.com/corporate/ebankhttps://ib.summitbank.com.pk/https://ib.bankalfalah.com.pk/

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    2.12 FACILITIES AVAILABLE TO NON-RESIDENT PAKISTANI AND FOREIGN INVESTORS

    Companies are permitted under paragraph 6 (with specific reference to sub para (B) (I)) of Chapter 20 of the State Bank of Pakistan’s (“SBP”) Foreign Exchange Manual (the “Manual”) to issue shares/certificates on repatriation basis to non-residents who are covered under paragraph 6 (A) of Chapter 20 of the Manual, i.e. (I) A Pakistan national resident outside Pakistan, (II) A person who holds dual nationality including Pakistan nationality, whether living in or outside Pakistan, (III) A foreign national, whether living in or outside Pakistan and (IV) A firm (including a partnership) or trust or mutual fund registered and functioning outside Pakistan, excluding entities owned or controlled by a foreign government, provided the issue price, is paid in foreign exchange through normal banking channel by remittance from abroad or out of foreign currency account maintained by the subscriber/purchaser in Pakistan.

    Non-residents who wish to subscribe certificates out of the General Public portion may contact any of the Bankers to the Issue for taking instructions regarding payment of subscription money against certificates offered to General Public /Retail Investors. List of Bankers to the Issue is available on page 1 and paragraph 8.11 of this Prospectus.

    The certificates issued to non-resident certificate holders shall be intimated by the Company to the designated Authorized Dealer, along with the documents prescribed in the Manual within 30 days of issue.

    Non-residents who are covered under paragraph 6 (A) of Chapter 20 of the Manual do not require SBP’s approval to invest in the certificates being issued in terms of this Prospectus. Furthermore, under paragraph 7 (vii) of Chapter 20 of the Manual the Authorized Dealer shall allow repatriation of dividends, net of applicable taxes and proceeds on sale of listed shares (i.e. divestment proceeds) not exceeding the market value less brokerage/commission on provision of prescribed documents.

    Payments made by foreign investors shall be supported by proof of receipt of foreign currency through normal banking channels. Such proof shall be submitted along with the application by the non-residents.

    2.13 MINIMUM AMOUNT OF APPLICATION AND BASIS OF ALLOTMENT OF MODARABA CERTIFICATES

    The basis and conditions of allotment to the general public shall be as follows:

    a) Application for certificates must be made for 500 certificates or in multiple of 500 certificates only. Applications which are neither for 500 certificates nor for multiples of 500 certificates shall be rejected.

    b) The minimum amount of application for subscription is of 500 certificates is Rs. 5,000 (Issue Price x 500 certificates).Any cost incurred in issuance of certificates as part of the Issue shall be borne by Issuer.

    c) Application for certificates below the minimum amount shall not be entertained.

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    d) SUBMISSION OF FALSE AND FICTITIOUS APPLICATIONS ARE PROHIBITED AND SUCH APPLICATION’S MONEY MAY BE FORFEITED UNDER SECTION 87(8) OF THE SECURITIES ACT, 2015.

    e) If the certificates issued to the General Public are sufficient to accommodate all

    applications, all applications shall be accommodated.

    f) If this Issue is oversubscribed in terms of number of applications, the certificates shall be allotted by conducting computer balloting in the presence of the representative(s) of PSX in the following manner:

    i. If all applications for 500 certificates can be accommodated, then all such applications shall be accommodated first. If all applications for 500 certificates cannot be accommodated then balloting will be conducted among applications for 500 certificates only.

    ii. If all applications for 500 certificates have been accommodated and certificates are still available for allotment, then all applications for 1,000 certificates shall be accommodated. If all applications for 1,000 certificates cannot be accommodated then balloting will be conducted among applications for 1,000 certificates only.

    iii. If all applications for 500 certificates and 1,000 certificates have been accommodated and certificates are still available for allotment, then all applications for 1,500 certificates shall be accommodated. If all applications for 1,500 certificates cannot be accommodated then balloting will be conducted among applications for 1,500 certificates only.

    iv. If all applications for 500 certificates, 1,000 certificates and 1,500 certificates have been accommodated and certificates are still available for allotment, then all applications for 2,000 certificates shall be accommodated. If all applications for 2,000 certificates cannot be accommodated then balloting will be conducted among applications for 2,000 certificates only.

    g) After the allotment in the above mentioned manner, the balance certificates, if any,

    shall be allotted in the following manner:

    i. If the remaining certificates are sufficient to accommodate each application for over 2,000 certificates, then 2,000 certificates shall be allotted to each applicant and the remaining certificates shall be allotted on pro-rata basis.

    ii. If the remaining certificates are not sufficient to accommodate all the remaining applications for at least 2,000 certificates, then balloting shall be conducted for allocation of 2,000 certificates to successful applicants.

    h) If the Issue is oversubscribed in terms of amount only then the allotment of certificates shall be made on the following basis:

    i. First preference will be given to the applicants who applied for 500 certificates;

    ii. Next preference will be given to the applicants who applied for 1,000 certificates;

    iii. Next preference will be given to the applicants who applied for 1,500 certificates; and

    iv. Next preference will be given to the applicants who applied for 2,000 certificates.

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    v. After allotment of the certificates in the above mentioned manner, the balance certificates, if any, shall be allotted on a pro-rata basis to the applicants who applied for more than 2,000 certificates.

    i) Allotment of certificates will be subject to scrutiny of the applications for subscription.

    j) Applications which do not meet with the above requirements or which are incomplete will be rejected.

    2.14 REFUND / UNBLOCKING OF SUBSCRIPTION MONEY TO UNSUCCESSFUL APPLICANTS

    As per the regulation 6(10) of the PO Regulations, within ten (10) working days of the close of public subscription period, the certificates shall be allotted and issued against the accepted and successful applications and the subscription money of the unsuccessful applicants shall be unblocked / refunded.

    As per sub-section (2) of Section 68 of the Companies Act, if refund as required under sub-section (1) of Section 68 of the Companies Act is not made within the time specified therein, the directors shall be jointly and severally liable to repay the money with surcharge at the rate of two percent (2% ) for every month or part thereof from the expiration of the 15th day and, in addition, shall be liable to penalty of level 3 on the standard scale as defined in Section 479 of the Companies Act, 2017.

    Provided that the directors of the Issuer shall not be liable if it proves that the default in making the refund was not on their own account and was not due to any misconduct or negligence on their part.

    2.15 MINIMUM SUBSCRIPTION FOR ALLOTMENT

    In the opinion of the directors of the Modaraba Company, the amount that must be raised as a minimum subscription in order to provide for the business operations and expenses is the whole amount of present issue of Rs. 250,000,000 out of which Rs. 150,000,000 has already been subscribed in cash by the Modaraba Management Company and Mughal Holding (Private) Limited as detailed in para 2.7 of this prospectus.

    2.16 PRINCIPAL PURPOSE OF THE USE OF SUBSCRIPTION MONEY

    The Modaraba has planned to take on Ijarah a “small section re-rolling mill” for manufacturing and sale of T-iron. The primary purpose of the issue is to finance working capital (raw material, manufacturing overheads and other expenses) requirements via equity financing instead of debt financing in accordance with injunctions of Shariah. This equity injection will allow the Modaraba to smoothly and efficiently manage its operations. Approximate utilization of proceeds is as follows:

    Sr. No Description Figures (Rs.)

    1 Raw material 200,000,000

    2 Security deposit – refundable 3,000,000

    3 Manufacturing overheads & other expenses 47,000,000

    Total 250,000,000

    *Small-section represents the technical term used to refer to the type of the products which the re-rolling mill is capable of manufacturing.

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    2.17 INTEREST OF CERTIFICATE HOLDERS

    Except as disclosed elsewhere, none of the certificate holders of the issued certificates of the Modaraba have any special or other interest in the property or profit of the Modaraba other than that as holders of the certificates in the funds of the Modaraba.

    2.18 ISSUE AND CREDIT OF MODARABA CERTIFICATES

    Within ten (10) working days of the close of public subscription period, the certificates shall be allotted and credited against the accepted and successful applications and the subscription money of the unsuccessful applicants shall be unblocked / refunded, as required under regulation 6(10) of the PO Regulations. Certificates will be issued only in the book-entry form. Therefore, the applicants must provide their CDS account Number in the Applicant Form. The Company shall credit certificates, within ten (10) working days of the closing of public subscription, in the respective CDS accounts of the successful applicants. If the Modaraba Company makes a default in complying with the above requirements, it shall pay to PSX a penalty of Rs. 5,000/- per day during which the default continues. PSX may also notify the fact of such default and the name of the Modaraba Company by notice and also by publication in the Ready Board Quotation of PSX. The name of the Modaraba will also be notified to the TREC holders of the PSX and placed on the website of the PSX.

    2.19 TRANSFER OF CERTIFICATES

    The Modaraba certificates shall be transferred in accordance with the provisions of Section 74 of the Companies Act, read with Section 75 thereof and the Central Depositories Act, 1997 and the CDCPL Regulations.

    2.20 CERTIFICATES SUBSCRIBED SINCE FLOATATION OF MODARABA

    Since obtaining authorization for floatation of Modaraba on December 14, 2017, the following Modaraba certificates have been subscribed:

    No. of Modaraba certificates

    Consideration Total value (Rs.)

    Subscribed by Date of subscription

    2,500,000 Cash 25,000,000 Mughal Modaraba Management Limited

    12/02/2018

    12,500,000 Cash 125,000,000 Mughal Holding (Private) Limited

    12/02/2018

    15,000,000 - 150,000,000 Total -

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    2.21 DIVIDEND POLICY

    The rights in respect of capital and dividends attached to each certificate would be the same. The Board of Directors of the Modaraba Company may from time to time pay to certificate holders such annual/interim dividend as appear to the directors to be justified by the profits of the Modaraba. No dividend shall be paid otherwise than out of the profits of the Modaraba for the year or any other undistributed profits. No unpaid dividends shall bear interest or mark-up against the Modaraba. The dividends shall be paid within the period laid down in the Companies Act, 2017. THE CASH DIVIDEND, IF ANY, SHALL BE DISTRIBUTED THROUGH DIRECT CREDIT IN THE CERTIFICATE HOLDERS’ RESPECTIVE BANK ACCOUNT. THE INVESTORS, THEREFORE, MUST FILL-IN THE RELEVANT PART OF THE CERTIFICATES SUBSCRIPTION FORM UNDER THE HEADING “DIVIDEND MANDATE” AND PROVIDE THEREIN THEIR BANK ACCOUNT FOR CREDIT OF THEIR CASH DIVIDENDS, IF ANY. Covenants / Restriction on Payment of Dividends It is stated that there is no restriction on the Modaraba by any regulatory authority, creditor, stakeholder etc. on the distribution and capitalization of its profits except as mentioned in this prospectus.

    2.22 MODE OF DISTRIBUTION OF PROFIT

    Not less than 90% of the net income in respect of the Modaraba business activities, (determined after charging the management fee up to 10% and after setting aside the mandatory reserve as per SECP’s Prudential Regulations for Modaraba, 2004) is proposed to be distributed at least once every financial year to the certificate holders in proportion to the number of certificates held by them. This will be subject to sufficient profitability during the year and discretion of the Board.

    2.23 ELIGIBILITY FOR DIVIDEND

    All Modaraba certificate holders shall be eligible for any distribution whenever declared. Except to the extent otherwise specified by the Registrar Modaraba for reasons to be recorded, the new Modaraba certificates shall rank pari passu with existing certificates in all matters including the right to such bonus and dividend as may be declared subsequent to the date of issue of such new certificates.

    2.24 DEDUCTION OF ZAKAT Dividend distribution will be subject to deduction of zakat at source pursuant to the provision of the Zakat and Ushr Ordinance, 1980 (XVIII of 1980) as may be applicable from time to time (except where the Zakat and Ushr Ordinance does not apply to any certificate holder or where such certificate holder is otherwise exempt or has claimed exemption from payment/ deduction of Zakat in terms of and as provided in the Zakat and Ushr Ordinance).

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    2.25 TAX EXEMPTION

    Under Clause 100 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 (XLIX of 2001) the income of the Modaraba, not arising from trading activities will be exempt from tax subject to distribution of at least 90% of its net income to the certificate holders, after transferring requisite amount to reserves in accordance with Prudential Regulations for Modaraba. Provided that with effect from the first day of July, 1999 for the purpose of determining the distribution of ninety per cent profits, the profits distributed through bonus certificates to the certificate holders shall not be taken into account.

    2.26 SALES TAX

    Sales tax on service provided by the Modaraba would be applicable as per relevant provincial Sales Tax laws at applicable rates for respective provinces.

    2.27 DEFERRED TAX The Modaraba will account for deferred taxation on all material temporary difference using the liability method arising between the amounts attributed to assets and liabilities for financial reporting purposes and financial statements used for taxation purposes. However, deferred tax liability will not be applicable and provided in the financial statements as the management believes that the future income of Modaraba will not be taxable in the foreseeable future due to the fact that the Modaraba intends to continue availing the tax exemption through profit distribution to the extent of 90% of distributable profit.

    2.28 SALES TAX ON SALE / PURCHASE OF MODARABA CERTIFICATES Under the Constitution of Pakistan and Articles 49 of the 7th NFC Award, the Government of Sindh, Government of Punjab, Government of Khyber Pakhtunkhwa and Government of Baluchistan have promulgated the Sindh Sales Tax on Services Act, 2011, Punjab Sales Tax on Services Act, 2012, Khyber Pakhtunkhwa Sales Tax on services through Khyber Pakhtunkhwa Finance Act, 2013 and the Baluchistan Sales Tax on services Act, 2015 respectively. The Sindh Revenue Board, the Punjab Revenue Authority, the Khyber Pakhtunkhwa Revenue Authority and the Baluchistan Revenue Authority administer and regulate the levy and collection of the Sindh Sales Tax (“SST”), Punjab Sales Tax (“PST”), Khyber Pakhtunkhwa Sales Tax (“KST”) and Baluchistan Sales Tax (“BST”) respectively on the taxable services provided or rendered in Sindh, Punjab, Khyber Pakhtunkhwa and Baluchistan provinces respectively. The value of taxable services for the purpose of levy of sales tax is the gross commission charged from clients in respect of purchase or sale of certificates in a Stock Exchange. The above – mentioned Acts levy a sales tax on Brokerage at the rate of 13 % in Sindh, 16% in Punjab and in Baluchistan and Khyber Pakhtunkhwa the rate is 15%. Sales tax charged under the aforementioned Acts is withheld at source under statutory requirements.

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    2.29 TAX CREDIT FOR INVESTMENT IN IPO Under Section 62 of the Income Tax Ordinance, 2001, a resident person other than a Company, shall be entitled to a tax credit, as mentioned in the said section, for a tax year in respect of the cost of acquiring in the year, new certificates offered to the public by a public company listed on a stock exchange in Pakistan, provided the resident person is the original allottee of the shares or the shares are acquired from the Privatization Commission of Pakistan. As per section 62(3) (b) of the Income Tax Ordinance, 2001, the time Limit for holding certificates has been designated as 24 months to avail tax credit.

    2.30 FUTURE CAPITALIZATION The Modaraba Company may make a right or a bonus issue of Modaraba certificates, subject to approval of the Registrar Modaraba, as deemed necessary for the business operations of the Modaraba, in accordance with the Modaraba Companies and Modaraba (Floatation and Control) Ordinance, 1980 and the Modaraba Companies and Modaraba Rules, 1981.

    2.31 WITHHOLDING TAX ON DIVIDENDS Dividend distribution to certificate holders will be subject to withholding tax under section 150 of the Income Tax Ordinance, 2001 as specified in Part III Division I of the First Schedule of the said ordinance or any time-to-time amendments therein. In terms of the provision of Section 8 of the said ordinance, said deduction at source, shall be deemed to be full and final liability in respect of such profits in case of individuals only. The following are the rates: - For filers of Income Tax Return: 15%

    - For non-filers of Income Tax Return: 20%

    2.32 TAX ON BONUS CERTIFICATES

    As per section 236 M of the Income Tax Ordinance 2001, tax at the rate of 5% of the value of bonus certificates determined on the basis of the day end ex-price be collected by the Modaraba issuing the bonus certificates, which will be the final tax liability on such income of the certificate holder.

    2.33 CAPITAL GAINS

    Under section 37A of the Income Tax Ordinance, 2001, capital gain on securities acquired after July 01, 2016 are subject to tax @15% for filers and 20% for non-filers.

    2.34 CAPITAL VALUE TAX (“CVT”) & WITHHOLDING TAX (“WHT”) ON SALE/PURCHASE OF CERTIFICATES

    On April 24, 2012, Finance (Amendment) Ordinance, 2012 was introduced whereby clause (F) was introduced in sub-section (2) of the Finance Act, 1989. This amendment reintroduced the Capital Value Tax at the rate of 0.01% of the purchase value on the purchase of shares/certificates of a company listed on PSX.

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    3 UNDERWRITING ARRANGEMENT, BROKERAGE & OTHER EXPENSES TO THE ISSUE

    3.1 UNDERWRITING

    The present public offer of 10,000,000 Modaraba certificates of Rs. 10/- each, offered at a par, has been fully underwritten as under:

    Sr. No Underwriters No. of Certificates Amount (Rs.)

    1 Dawood Equities Limited 5,000,000 50,000,000

    2 AKD Securities Limited 5,000,000 50,000,000

    Total 10,000,000 100,000,000

    If and to the extent, Modaraba certificates hereby offered are not subscribed and paid for in cash in full by the closing of the subscription list, the Underwriters shall within 15 days of being duly called upon by the Modaraba Company to do so, subscribe and pay for or procure subscribers to subscribe and pay for in cash in full those Modaraba certificates not so subscribed.

    In the opinion of the directors of the Modaraba Company, the resources of the Underwriters are sufficient to discharge their underwriting commitments.

    3.2 NO BUYBACK / REPURCHASE AGREEMENT

    NEITHER THE UNDERWRITERS NOR ANY OF THEIR ASSOCIATES HAVE ENTERED INTO ANY BUYBACK OR REPURCHASE AGREEMENT WITH THE SPONSORS, THE MODARABA COMPANY OR ANY OTHER PERSON IN RESPECT OF THIS PUBLIC ISSUE.

    ALSO, NEITHER THE MANAGEMENT COMPANY NOR ANY OF ITS ASSOCIATES HAVE ENTERED INTO ANY BUY BACK / RE-PURCHASE AGREEMENT WITH THE UNDERWRITERS OR THEIR ASSOCIATES.

    THE MANAGEMENT COMPANY AND ITS ASSOCIATES SHALL NOT BUY BACK / RE-PURCHASE CERTIFICATES FROM THE UNDERWRITERS AND THEIR ASSOCIATES.

    3.3 UNDERWRITING EXPENSES

    The Underwriters have been paid an underwriting expense @ 1.50% on the amount of the public issue underwritten by them. In addition a take up expense @2.00% shall be paid to the Underwriters on the amount of certificates actually taken up by them.

    3.4 FEE AND EXPENSES FOR CENTRALIZED E-IPO SYSTEM (CES)

    The commission on applications received through CES will be paid to CDC, which shall not be more than 0.80% of the amount of the successful applications. CDC will share the fee with other participants of CES at a ratio agreed amongst them.

    3.5 COMMISSION TO THE BANKERS TO THE ISSUE

    A commission not exceeding 0.25% of the amount collected on allotment in respect of successful applicants of the Modaraba certificates will be paid to the bankers to the issue for services to be rendered by them in connection with this issue. No commission shall be paid to the bankers in

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    respect of Modaraba certificates subscribed by the underwriters by virtue of their underwriting commitments.

    3.6 BROKERAGE

    Brokerage shall be paid to the TREC holders of PSX, at the rate of 1.0% of paid-up value of Modaraba certificates actually sold through them. No brokerage shall be payable in respect of Modaraba certificates taken up by the Underwriters by virtue of their underwriting commitment.

    3.7 PRELIMINARY EXPENSES AND EXPENSES TO THE ISSUE

    The preliminary expenses payable by the Modaraba and expenses of the proposed issue to the public inclusive of cost of organization and floatation of the Modaraba, cost of printing, publication and distribution of this prospectus, underwriting expenses, commission to the bankers to the issue and brokerage etc. are estimated at Rs. 14,970,000 The estimated preliminary expenses and expenses to the issue are detailed as follows as described below, shall be paid by the Modaraba and shall be charged to the Profit & Loss Account of the Modaraba during the first year of operations.

    Expenses Rate Amount in (Rs.)

    Fee to Consultants to the Issue 3,750,000

    Underwriting expenses 1.50% 1,500,000

    Commission to the bankers the Issue * 0.25% 250,000

    Bankers to the issue – out of pocket expenses* 250,000

    Bankers to the issue – e-IPO expenses 775,000

    Brokerage to TREC Holders of PSX* 1.00% 1,000,000

    Expenses on centralized e-IPO system* 0.80% 800,000

    Authorized Modaraba Fund Fee 3,050,000

    CDC annual fee for being eligible security 220,000

    CDC Fresh Issue fee 0.16% 400,000

    PSX annual listing fee 182,500

    PSX initial listing fee 0.10% 250,000

    PSX service charges 50,000

    SECP application and processing fee 0.025% 562,500

    SECP supervisory fee 43,250

    Balloter Fee 260,000

    Shariah advisor fee 25,000

    Auditors fee 220,000

    Printing 500,000

    Marketing Charges 700,000

    Miscellaneous costs 181,750

    TOTAL 14,970,000

    Note: The above figures are indicative and may change at the time of IPO. * Indicate the maximum possible cost under these heads

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    4 THE MODARABA MANAGEMENT COMPANY

    4.1 INTRODUCTION TO MANAGERS OF THE MODARABA

    Mughal Modaraba Management Limited is an unlisted public limited company incorporated in the province of Punjab under the Companies Act, 2017 (previously Companies Ordinance, 1984). It was registered as a Modaraba Management Company with the Registrar Modaraba, on April 13, 2017. Presently the Board of the Modaraba Company comprises of the following persons:

    NAME DESIGNATION

    Mr. Khurram Javed Director/Chairman

    Mr. Muhammad Mubeen Tariq Mughal Director/CEO

    Mr. Fazeel Bin Tariq Director

    The Directors of Mughal Modaraba Management Limited shall ensure smooth operations and functioning of the Modaraba.

    4.2 CAPITAL OF THE MODARABA MANAGEMENT COMPANY

    The authorized capital of Mughal Modaraba Management Limited is Rs. 120,000,000 divided into 12,000,000 shares of Rs. 10/- each. The paid-up capital of the Modaraba Management Company is Rs. 3,000,000 divided into 300,000 shares of Rs. 10/- each.

    4.3 OBJECTIVES OF THE MODARABA COMPANY To initiate, sponsor, promote, float, organize, manage, administer and operate Modaraba companies, multipurpose and specific purpose Modaraba and Modarabas of all types and description, Modaraba funds and other similar concerns either in syndicates or otherwise subject to approval of Registrar of Modarabas, under the Modaraba Companies & Modaraba (Floatation & Control) Ordinance, 1980.

    4.4 PROMOTERS AND MANAGERS OF THE MODARABA COMPANY The Modaraba Company with Mughal Group as the main sponsors would provide strong support to Modaraba. The Board, including the Chief Executive Officer of the Modaraba Company, consists of 3 members who will ensure smooth operation and functioning of the Modaraba.

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    5 MODARABA OBJECTIVES, BUSINESS AND PROSPECTS

    5.1 TYPE OF MODARABA

    The MUGHAL MANUFACTURING MODARABA is a multi-purpose and perpetual Modaraba.

    5.2 OBJECTIVES OF THE MODARABA The mission of Mughal Manufacturing Modaraba is to seek pleasure of Almighty Allah through making its humble contribution in the transformation of our manufacturing in accordance with the principles enshrined in Shariah. We seek Allah’s guidance and blessing in understanding and implementing Allah’s will in the matter of manufacturing in accordance with practices of His Prophet. The fundamental mission that since Islam has prohibited Riba and have blessed trade, Mughal Manufacturing Modaraba will promote manufacturing activities according to the spirit of Islam. In the business dealings of the Modaraba, its internal environment and inter-personal relations; the rights of Allah, the rights of all certificate holders, the rights of investors and customers and all others will sincerely be recognized and safeguarded.

    5.3 DESCRIPTION OF THE MODARABA BUSINESS 5.3.1 MODE OF TRANSACTIONS

    Modaraba shall not enter into any transactions or business dealings which are opposed to the injunction of Islam and shall not enter into any sale or purchase or any transactions which are in violation of the injunctions of Islam. All transactions of the Modaraba will be in accordance with Shariah Rules. All transactions of the Modaraba will be in accordance with the modes already approved by the Religious Board or that may be approved or modified by the Religious Board in the future. All transactions of the Modaraba will be in accordance with the Modaraba Ordinance, Modaraba Rules and Prudential Regulations for Modarabas and other applicable laws, rules and regulations approved by the SECP.

    5.3.2 MODARABA’S BUSINESS OBJECTIVES

    i. To carry on all or any of the business of manufacturer and dealer of all kinds of steel products, including but not limited to, sheets, beams / billets, girders, rebars, channels and angles etc.

    ii. To carry on the business of manufacturer of ferro and ferro alloys.

    iii. To carry on business as generator, purchaser, transformer, converter, distributor and supplier, of electricity and all other forms of energy and products or services associated therewith and of promoting the conservation and efficient use of electricity and to perform all other acts which are necessary or incidental to generation, transmission, distribution and supply of electricity.

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    iv. To carry on the business of manufacturing, producing, refining, procuring, preparing, importing, exporting, exchanging, buying, selling, acquiring, distributing and dealing in sugar of any variety or varieties.

    v. To carry on business of producing, manufacturing, preparing, treating, processing, refining,

    and dealing etc., in all kinds of cement and its allied products. 5.3.3 RESOURCES AND MOBILIZATION

    The Modaraba can mobilize additional resources from Islamic financial institutions, Corporates and general public by using the following permissible modes: i. Musharakah; ii. Murabahah; iii. Mudarabah; iv. Istisna; v. Salam; vi. Sukuk; vii. Other permissible Islamic modes of financing and/or investment approved by the Religious Board and the SECP from time to time. All the operations and transactions shall be inconformity with the injunctions of the Shariah and in accordance with the arrangements and / or instruments approved by the Religious Board from time to time. The Modaraba shall not invite or raise deposit in any form from the general public without the prior written approval of the Registrar Modaraba / Securities and Exchange Commission of Pakistan.

    5.3.4 INDUSTRY AND OPERATIONS

    Steel industry is considered as the backbone of the modern society and has direct correlation with the industrial development, given its utility in all industrial processes and sectors ranging from infrastructure, construction, automobiles, and transportation and home appliances. Demand for steel in Pakistan is estimated at 6 million MT and has seen a rising trend over the last few years due to strong growth in construction activity. As per the State Bank of Pakistan’s annual report for FY17, the domestic steel production grew by 20.53 percent. The State Bank’s report also indicates that the “outlook for the industry remains encouraging in view of expected strong growth in the allied industries, such as automobile (especially the two/three wheelers which depend mostly on local vendors for the supply of raw materials such as steel and construction (where a focus on higher infrastructure spending would increase the demand for steel pipes and other related construction products)”. Pakistan is still amongst the lowest per capita consumers of steel at 39.5kg/capita 4which is well below the world average approximately207.3kg/capita and indicates the immense potential for growth in the domestic steel manufacturing and processing industry. The envisaged plan is to take on Ijarah a “small section re-rolling mill” for a minimum period of ten years to manufacture and sale T-Iron. The re-rolling mill will be taken on Ijarah from Mughal

    3 State of the Economy-Annual Report (2016-17) 4 Apparent Steel Use per capita (finished steel products) 2016-Steel Statistical Yearbook 2017

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    Steel Metallurgies Corporation Limited (“an associated undertaking due to common directorship”). The agreement will be irrevocable for the first ten years and can only be cancelled by the Modaraba Company during that tenure. After ten years, the agreement can be mutually extended. Currently, the mill is being used by third party for Tolling services. However, the sponsors of Mughal Modaraba Management Limited believe that, if working capital is made available than there is potential for profit making. Further, due to their steel industry knowledge and experience, they can better manage the operations as well including but not limited to procurement of raw material, production and sales activity, therefore, Modaraba will manufacture and sale its own T-iron in market. The Modaraba will purchase ingot from market, convert it into T-Iron and sale it in market. Currently the key competitors are AMK Steel, Kamran Steel, Subhan Steel Mills and Tauqeer Steel.

    5.3.5 PRODUCT RANGE

    The Modaraba will manufacture T-Iron on the re-rolling mill. T-Iron is used in residential and industrial structures.

    The following different categories of T-Iron will be manufactured:

    1. 500 gram 2. 600 gram 3. 700 gram 4. 800 gram 5. 900 gram 6. 1000 gram 7. 1200 gram 8. 1300 gram

    These represent product categories. Gram represents gram per foot.

    5.3.6 SPONSOR STRENGTH

    Modaraba has an associated company, Mughal Iron & Steel industries Limited (“MISIL”) which is listed on Pakistan Stock Exchange. The sponsors and management of Modaraba are also part of the Board of Directors of MISIL. They have in-depth knowledge of steel market and its dynamics. Mughal Iron & Steel Industries Limited (“MISIL”) was incorporated in 2010 and took over the running business of “Mughal Steel” (Partnership concern). In 2015, MISIL got listed on Pakistan Stock Exchange Limited and since then has shown tremendous growth and profitability.

    5.3.7 MEANS OF FINANCING AND UTILIZATION OF PROCEEDS

    Means of financing & break up of utilization of proceeds from the issue is as follows:

    Means of Financing

    Sr. No Description Number of Certificates Amount (Rs.)

    1 Mughal Modaraba Management Limited

    2,500,000 certificates of Rs. 10/- each

    25,000,000

    2 Mughal Holding (Private) Limited

    12,500,000 certificates of Rs. 10/- each

    125,000,000

    3 Present issue to general Public 10,000,000 certificates of Rs. 10/- each

    100,000,000

    Total 250,000,000

    Utilization of Funds

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    Sr. No Description Amount (Rs.)

    1 Raw material 200,000,000

    2 Security deposit - refundable 3,000,000

    3 Manufacturing overheads and other expenses 47,000,000

    Total 250,000,000

    The Raw Material purchase will consist of purchase of Ingots which will be the key raw material for production of Tee Iron. The security deposit consists of the 6 Month advance rental at Rs. 500,000 per month required under the Ijarah agreement (for details refer to section 8.13 of the Prospectus) and is refundable upon maturity of the contract, if not renewed. Manufacturing overheads and other expenses include the expenses incurred in production in the initial months of operation including production, administrative and distribution expense as well as the expenses incurred in the floatation of the Modaraba. The Modaraba Company proposes to deploy the net proceeds in the aforesaid purpose during financial year June 30, 2018.

    5.4 TRANSACTIONS WITH BENEFICIAL OWNERS OF THE MODARABA COMPANY

    The Modaraba Company, on behalf of the Modaraba, has entered into an Ijarah agreement of a “small section re-rolling mill” with Mughal Steel Metallurgies Corporation Limited for a period of 10 years (Agreement dated 11th January 2018). The director(s) of the Modaraba Company are also the director(s) of Mughal Steel Metallurgies Corporation Limited.

    5.5 CONFLICT OF INTEREST

    i. The Modaraba shall not make any transaction with any person, except in connection with the normal business of the Modaraba. Such funds or advances shall be under Islamic modes of finance.

    ii. The Modaraba Company or any of its directors, officers or their relatives shall not obtain

    funds, advance or credit from the funds of the Modaraba or on the security of the assets of the Modaraba.

    5.6 As per part III (1) of the Prudential Regulations for Modaraba, the Modaraba s