Report on disclosure in offer document_Case Study of Bharti Infra and V Mart

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Report on disclosure in offer document_Case Study of Bharti Infra and V Mart Retail and SEBI Guidelines -- Business Law

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Report on disclosure in offer document_Case Study of Bharti Infra and V Mart

  1. 1. Mumbai Educational Trust MET League of Colleges Business Law A Report on Critical Disclosure in Offer Document A Case Study of Bharti Infratel Limited and V-Mart Retail Limited The objective of this report is “To study the present legal and regulatory framework of offer document, critical disclosures and undertakings" specified by the relevant SEBI regulations which enable investors to make an informed investment decision. These regulations are explained in this report with the help of recently floated IPOs of Bharti Infratel Limited and V-Mart Retail Limited.” . Prepared by: Students of MFM (2011 – 2014) Nitin Agarwal (61) Amit Chauhan (63) Shanmukh Dave (65) Laxmi Dodeja (69) Rupesh Gajare (71) Veena Jirafe (77) Yashshree Kokate (79) Bonnie Lobo (81) March 2013
  2. 2. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT A Report on Critical Disclosure in Offer Document Table of Content 1. General ..................................................................................................... 3 1.1. 1.2. Objective of report ......................................................................... 3 1.3. Scope of Study .............................................................................. 4 1.4. 2. Introduction .................................................................................... 3 Limitations ..................................................................................... 4 IPO and Process ...................................................................................... 5 2.1. 2.2. 3. What is IPO ................................................................................... 5 Process of Floating an IPO ............................................................ 6 IPOs performance ................................................................................... 7 3.1. 3.2. Year wise amount raised through IPOs .......................................... 7 3.3. 4. Latest IPOs issued since September 2012 .................................... 7 Year wise analysis of succeeded vs failed IPOs ............................ 8 Critical disclosures in offer document................................................... 9 Disclosure 1. Company Introduction ................................................... 11 Disclosure 2. Risk factors ................................................................... 13 Disclosure 3. Capital Structure............................................................ 17 Disclosure 4. Object of the Issue ........................................................ 20 Disclosure 5. Basis of issue price ....................................................... 25 Disclosure 6. Promoter Contribution ................................................... 32 Disclosure 7. Lock-in requirement ....................................................... 35 Disclosure 8. Management ................................................................. 40 Disclosure 9. Dividend Policy .............................................................. 46 Disclosure 10. Financial Details ............................................................ 48 Disclosure 11. Litigations ...................................................................... 57 Disclosure 12. Government Approvals .................................................. 65 Disclosure 13. IPO Grading .................................................................. 69 Disclosure 14. Eligibility for the Issue .................................................... 73 Disclosure 15. Allotment of shares ........................................................ 76 MFM (2011 – 2014) – BUSINESS LAW PAGE 1 OF 82
  3. 3. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT 5. Recommendation and Conclusion ....................................................... 78 6. Bibliography .......................................................................................... 81 List of Tables: Table 1: Issue Details .............................................................................. 10 Table 2: Capital Structure of Bharti Infratel Limited .................................. 17 Table 3: Capital Structure of V-Mart Retail Limited .................................. 18 Table 4: Promoter's Contribution of Bharti Infratel Limited ....................... 32 Table 5: Promoter's Contribution of V-Mart Retail Limited ....................... 33 Table 6: Management details of Bharti Infratel Limited ............................ 40 Table 7: Management details of V-Mart Retail Limited............................. 43 Table 8: Litigation against Bharti Infratel .................................................. 59 Table 9: Litigation for V-Mart Retail Limited ............................................. 61 Table 10: Contingent Liability of V-Mart Retail Limited............................. 62 Table 11: Difference between IPO Rating and IPO Grading .................... 69 Table 12: Financial details of Bharti Infratel Limited for Eligibility ............. 73 Table 13: Financial details of V-Mart Retail Limited for Eligibility ............. 75 List of Figures: Figure 1: Process of Floating an IPO ......................................................... 6 Figure 2: Latest IPOs issued since September 2012 ................................. 7 Figure 3: Year wise amount raised through IPOs ...................................... 7 Figure 4: Year wise analysis of succeeded vs failed IPOs ......................... 8 Figure 5: Shareholding Pattern before and after Issue for Bharti Infratel Limited ......................................................................................... 33 Figure 6: Shareholding Pattern before and after Issue for V Mart Retail Limited .......................................................................................... 34 Figure 7: Total Assets of the Firm ............................................................ 49 Figure 8: Total Liabilities of the Firm ........................................................ 50 Figure 9: Net Worth of the Firm ............................................................... 50 Figure 10: Reserves and surplus ............................................................. 51 Figure 11: Income statement of the firm .................................................. 51 Figure 12: Cash Flow Statement ............................................................. 52 Figure 13: Total Assets of the Firm .......................................................... 53 Figure 14: Total Liabilities of the Firm ...................................................... 53 Figure 15: Net Worth of the Firm ............................................................. 54 Figure 16: Reserves and surplus ............................................................. 54 Figure 17: Income statement of the firm .................................................. 55 Figure 18: Cash Flow Statement ............................................................. 56 MFM (2011 – 2014) – BUSINESS LAW PAGE 2 OF 82
  4. 4. MET LEAGUE OF COLLEGES 1. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT General 1.1. Introduction The word IPO is very much often used in the issue of shares by the companies when they want to go for public for the huge amount of investment into the purpose of the company for achieving the desired objectives. The word IPO stands for Initial Public Offer and this is unique in more ways than one since it permanently changes the profile of a company and the way the promoters and the management need to think thereafter. The responsibility of living up to the expectation of the market and shareholders is a mammoth task. Given the fact there is always a temptation for companies to look at the primary market as source of finance through IPO route, the regulator SEBI has evolved an IPO code in the form of the SEBI (Disclosure and Investor Protection) guidelines. SEBI has also brought in several structural improvements in the way the public offers are made in the primary market. Initial Public offer (IPO)is one of the way of raising capital for the companies which proposed to expand their operations or they want to start a new venture. As this is the effect way of getting funds from public for the first time for every company which wants to go public, that company has to follow a certain set of guidelines which we call as Disclosure and Investor Protection (DIP) Guidelines. And the process of coming to IPO has been very important for the company, this project has been describing about the issues procedure along with the advantages and disadvantages for coming to an IPO. For better understanding of how the companies have to raise funds, the analysis of some companies which recently came for an IPO and the success of their IPO has been clearly explained. The main aim for undertaking this project is to be aware about how the companies come for an IPO route for raising funds to achieve the proposed target and another thing is the procedure to be followed by the company for raising of funds and how to work with all the parties involved in the IPO process, their duties and responsibilities for the better results. The conclusion regarding this project is addressing the students how the companies come for an IPO with certain procedure and make them aware about the issues in an IPO. 1.2. Objective of report  To make aware the intending investors about the procedure what has to be followed in the issue of securities for public subscription. MFM (2011 – 2014) – BUSINESS LAW PAGE 3 OF 82
  5. 5. MET LEAGUE OF COLLEGES        1.3. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT To provide them the guidelines which are to be followed by companies in an IPO. To know the key terms and various stages in an IPO process. About the various parties involved along with the company for making an IPO. to look into the aspects of different companies which have come for an IPO recently along with their respective strengths and weakness. To know how the share are valued and the different methods of pricing them in an IPO. To know the various parties involved in an IPO and their respective formalities to be completed. To know the factors which can lead to success or failure of an IPO Scope of Study In initial public offering (IPO), the companies have to look into the various aspect like what guidelines it has to follow, the procedure for coming to public issue of shares for the proposed objective. So the company has to fulfil various formalities and regulations specified by the controller SEBI before coming to an IPO. Scope of this project is limited to the guidelines and procedures for coming to an IPO along with the factors which leads to the success or failure of an IPO of different companies. And the scope is limited to mentioned companies which recently came for an IPO and their strengths and weakness for succeeding in an IPO. 1.4. Limitations  The project is prepared in limitation to the availability of data.  The regulations and procedure to be followed is mentioned according to SEBI rules.  Study is limited to companies which are used in analysis of an IPO performance at the end.  The data is limited to recent amendments which are to be followed.  The duties mentioned for each and every participant are in consideration to the recommendations from SEBI. MFM (2011 – 2014) – BUSINESS LAW PAGE 4 OF 82
  6. 6. MET LEAGUE OF COLLEGES 2. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT IPO and Process 2.1. What is IPO A definition:  Initial Public Offering refers to the selling of shares by a private company to the public for the first time. Initial Public Offering is a source of funds raised from the primary market. All subsequent public offerings are known as Follow-on Public Offerings or Secondary Market Offerings.  An IPO is an abbreviation for Initial Public Offer. When a company goes public for the first time or issues a fresh stock of shares, it offers it to the public directly. This happens in the primary market. The primary market is where a company makes its first contact with the public at large. Red Herring Prospectus (RHP)  A formal legal document, which is required by and filed with the Securities and Exchange Commission that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.  Also known as an "offer document".  RHP contains all the information and factor which can influence the decision of an investor. Like 1. Where the company will use the funds so raised 2. Companies previous records 3. Promoters track records 4. Companies current, likely profit and EPS 5. Companies future plan  The investor should thoroughly go through RHP before subscribing the issue. RHP is available at SEBI’s and merchant banker’s website. It may be available in physical form at broking houses. Governing Laws  Before 1992, Public issues were governed by Chief Controller of Capital Issues (CCCI).  In 1992, CCCI has been abolished and SEBI has been formed.  Now IPO is governed by Followings: 1. The Companies Act 1956 2. SEBI (Disclosure & Investor Protection) Guidelines, 2000 3. Securities Contracts (Regulation) Act, 1956 4. Listing norms/Guidelines of NSE/BSE MFM (2011 – 2014) – BUSINESS LAW PAGE 5 OF 82
  7. 7. MET LEAGUE OF COLLEGES 2.2. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Process of Floating an IPO Figure 1: Process of Floating an IPO 1. 2. 3. 4. 5. 6. 7. Company nominates lead merchant banker(s) Disclose of securities to be issued & price band for bidding Appointment of syndicate members Bidding process Process normally remains for 5 days Bids have to be entered within the specified price band On the closure of the process, the book runners evaluates the price levels 8. At last the book runners & the issuer decides the final price 9. Allocation of securities is made to the successful bidders 10. Rest gets refund orders. Sebi wants to shorten IPO bidding period, favours faster listing PTI Aug 29, 2012, 01.42PM IST Capital Market regulator Sebi will soon ask companies seeking to raise funds through Initial Public Offers (IPOs) to complete the bidding process within a maximum five days and get listed in another five days. To shorten the entire IPO process, Sebi is also working at faster allotment of shares to investors and reduce the time -gap between closure of issue and final listing from 12 days to five days, a senior official said. MFM (2011 – 2014) – BUSINESS LAW PAGE 6 OF 82
  8. 8. MET LEAGUE OF COLLEGES 3. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT IPOs performance 3.1. Latest IPOs issued since September 2012 Figure 2: Latest IPOs issued since September 2012 * AS on date: Thursday, March 14, 2013 Out of all the IPOs issued since Sept 2012, 5 IPOs has negative gain as on date. Issue price of CARE Ltd. is most expensive, but has a reasonable gain. 3.2. Year wise amount raised through IPOs Figure 3: Year wise amount raised through IPOs * AS on date: Jan 31, 2013 MFM (2011 – 2014) – BUSINESS LAW PAGE 7 OF 82
  9. 9. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT IPOs of worth Rs. 238 crore has been floated in the first month of year 2013. In last 5 years, maximum amount of IPOs has been floated in years 2010. In year 2011 least amount of IPOs has been floated. 3.3. Year wise analysis of succeeded vs failed IPOs Figure 4: Year wise analysis of succeeded vs failed IPOs * AS on date: Jan 31, 2013 310 nos. of IPOs issued since 2007, out of which 15 IPOs failed. In year 2007, maximum nos. of Issues has been floated and only 4 nos. of IPOs has failed. In year 2007, 104 nos. of Issues raised approx. Rs. 34,000 Crore, compared to year 2010, only 68 issues offered an amount of worth Rs. 36,000 Crore. MFM (2011 – 2014) – BUSINESS LAW PAGE 8 OF 82
  10. 10. MET LEAGUE OF COLLEGES 4. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Critical disclosures in offer document Following are the major Critical disclosures in an offer document (IPO) 1. Company Introduction 2. Risk factors 3. Capital Structure 4. Object of issue 5. Basis of issue price 6. Promoter’s Contribution 7. Lock-in requirement 8. Management 9. Dividend Policy 10. Financial Details 11. Litigations 12. Government Approvals 13. IPO Grading 14. Eligibility for the Issue 15. Allotment of shares Requirements of SEBI guidelines for IPO document are discussed in the following chapters. We have also studied Offer Documents of Bharti Infratel Limited and V Mart Retail Limited. Our analysis and views on disclosure requirement in the offer document and suggested amendments of these two offer documents are discussed in subsequent chapters. MFM (2011 – 2014) – BUSINESS LAW PAGE 9 OF 82
  11. 11. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Issue Details Table 1: Issue Details Issue Open Dec 11, 2012 - Dec 14, 2012 Feb 01, 2013 - Feb 05, 2013 Issue Type 100% Book Built Issue IPO 100% Book Built Issue IPO Issue Size : 188,900,000 Equity Shares of Rs. 10 4,496,000 Equity Shares of Rs. 10 Issue Size Rs. 4,155.80 Crore Rs. 94.42 Crore Face Value Rs. 10 Per Equity Share Rs. 10 Per Equity Share Issue Price Rs. 210 - Rs. 240 Per Equity Share Rs. 195 - Rs. 215 Per Equity Share Market Lot 50 Shares 66 Shares Minimum Order Quantity 50 Shares 66 Shares Listing At BSE, NSE BSE, NSE MFM (2011 – 2014) – BUSINESS LAW PAGE 10 OF 82
  12. 12. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 1. Company Introduction SEBI Requirements (Chapter 6 - 6.42.8.1) In case the issuer company has not come out with any issue in the past ten years or more, a brief statement about the history and corporate structure of the issuer company, the main objects of the issuer company and major events in the past. Bharti Infratel Limited Bharti Infratel has reported a sales standalone turnover of Rs 1,148.50 crore and a net profit of Rs 151.60 crore for the quarter ended Dec '12. CRISIL has given a Credit Rating of 4/5 to Bharti Infratel Limited IPO Incorporated in 2006, Bharti Infratel Limited is a provider of tower and related infrastructure. Bharti Infratel is one of the world's largest telecom tower infrastructure providers which deploys, owns and manages telecom towers and communication structures for all wireless operators. The business of Bharti Infratel and Indus is to acquire, build, own and operate tower and related infrastructure. Bharti Infratel and Indus currently provide access to their towers primarily to wireless telecommunications service providers. Bharti Infratel's and Indus's three largest customers are Bharti Airtel (together with Bharti Hexacom), Vodafone India and Idea Cellular. They are the three leading wireless telecommunications service providers in India by wireless revenue. In India, Infratel has over 34,000+ towers, across 18 states, and 11 Telecom circles, and still growing. Bharti Infratel also has a 42% stake in Indus Towers which was created as a Joint Venture between Bharti Infratel, Vodafone and Aditya Birla Telecom to hive off the Towers business in 15 telecom circles. MFM (2011 – 2014) – BUSINESS LAW PAGE 11 OF 82
  13. 13. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT V-Mart Retail Limited Incorporated in 2002, V-mart is a medium-sized hypermarket format retail chain based in New Delhi. They are multi-brand family store offers apparels, general merchandise and kirana bazar. VMRL has established stores in Metro, Tier-I, Tier-II and Tier-III cities which are primarily located as standalone stores in high-street areas and shopping hubs of such cities. V-mart Retail as a public limited entity The average size of store is and also crossed the turnover of 1,000 approximately 8,000 Sq. Ft. million Rs. As the time passes by we took The company follows the the shape of a renowned family brand concept of "value retailing" to that caters the needs of whole family by target the strata of the offering high quality retail products. population belonging to the Along with growing customers, we achieved a turnover of over Rs 2,000 expanding “aspiring class‟ and million in 2011-12 In the Year 2012 we “middle class‟ and is based on have crossed the retail space of 5 lac Sq. customer’s socio-economic Ft. conditions, purchasing power, demographic details and customer trends. Its offerings in untapped markets provide customers with a different shopping experience, comprising of a vast range of value retail products under a modern ambience and feel of a large retail mall. V-Mart has more than 62 stores across 53 cities including metro cities with a total area of more than 4 lac sq.ft. Company's stores are located in prime cities such as New Delhi, Gujarat, Uttar Pradesh, Bihar, Punjab, Chandigarh, Haryana, Jammu and Kashmir, Rajasthan and Madhya Pradesh. They are setting up stores across various small Indian towns and cities including Sultanpur, Ujjain, Motihari. Their aim is to provide fancy garments at lower price points in an organised modern retail format to middle and lower middle classes MFM (2011 – 2014) – BUSINESS LAW PAGE 12 OF 82
  14. 14. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 2. Risk factors In this section, disclosure about the Internal, External and Issues related Risks of the company has been given, which helps investors to carefully analyse the risks before investing into IPO. SEBI Requirements As per requirement of extant SEBI (DIP) Guidelines, risk factors and management perception of those risk factors, if any are required to appear on the first inner page and shall continue to other subsequent pages, if required, of the offer document. 6.7.2 The Risk factors shall be classified as those specific to the project and internal to the issuer company and those which are external and beyond the control of the issuer company. 6.7.5.1 Risks envisaged by Management. 6.7.5.2 Proposals, if any, to address the risks. 6.7.6 Any ‘notes’ required to be given prominence shall appear immediately after the Risk factors. The following clause on general risk shall be incorporated: "Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in this offer unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this offering. For taking an investment decision, investors must rely on their own examination of the issuer and the offer including the risks involved. The securities have not been recommended or approved by Securities and Exchange Board of India (SEBI) nor does SEBI guarantee the accuracy or adequacy of this document." Bharti Infratel Limited MFM (2011 – 2014) – BUSINESS LAW PAGE 13 OF 82
  15. 15. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT There are 53 risks to the business has been given in offer document. We have enlisted few major risks associated with the Business. Internal Risks          There are legal proceedings against Bharti Infratel. There can be no assurance to investors that Bharti Infratel will prevail in these actions. There are certain proceedings initiated against Bharti Infratel under the provisions of the Indian Penal Code, 1860 and the Code of Criminal Procedure, 1973. A decrease in demand for tower infrastructure in India could materially and adversely affect operating results. Bharti Infratel and Indus are heavily dependent on factors affecting the wireless telecommunications industry in India, in particular the growth of their key customers. Licences and permits required in the tower business are varied and may be difficult to obtain, and once obtained, may be amended or revoked or may not be renewed. The business and activities of Bharti Infratel and Indus may be regulated by the Competition Act, 2002. Indus is a joint venture which is not operated solely for Bharti Infratel’s benefit, which exposes Bharti Infratel to certain risks. Bharti Infratel’s audit report includes specific qualifications with regard to delayed statutory payments and fraud which have been appropriately addressed in the restated financial statements. The loss of any of Bharti Infratel’s or Indus’ major customers would have a material adverse effect on us. External Risks  Political instability or changes in the Indian central government could adversely affect economic conditions in India and consequently, our business.  Hostilities, terrorist attacks, civil unrest, breaches of law and order and other acts of violence may adversely affect the business and the trading price of the Equity Shares.  Investors may be adversely affected due to retrospective tax law changes by the Indian government affecting Bharti Infratel or the Group.  Bharti Infratel’s ability to raise foreign capital may be constrained by Indian law.  Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions. Risks Relating to the Issue MFM (2011 – 2014) – BUSINESS LAW PAGE 14 OF 82
  16. 16. MET LEAGUE OF COLLEGES       A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Bharti Infratel has made a bonus issue in the last one year Any future issuance of Equity Shares may dilute your shareholding and sales of the Equity Shares by the Promoter may adversely affect the trading price of the Equity Shares. There is no existing market for the Equity Shares, and the company does not know if one will develop to provide investors with adequate liquidity. Investors may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect investors’ ability to sell Equity Shares or the price at which Equity Shares can be sold at a particular point in time. Investors may have difficulty enforcing foreign judgments against Bharti Infratel or its management. V-Mart Retail Limited Internal Risk Factors          Company does not have any definitive agreements with vendors for supply of raw materials, general merchandise goods and apparels. Further, they do not have fixed terms of trade with majority of vendors or suppliers for supply of FMCG products. Losses on account of Shrinkage may have a negative impact on profitability. The Company will not receive any proceeds from the Offer for Sale. Company’s growth strategy to expand into new geographic areas exposes them to certain risks. Company has availed unsecured loans, which can be recalled anytime by their respective lenders. Company had negative cash flows from operating, financing and investing activities in certain Years Company’s expansion plans are subject to the risk of cost and time overruns, which could have an adverse impact on their results of operations and financial condition. Some of lease agreements may have certain irregularities They have issued Equity Shares during the last one year at a price that may be below the Issue Price. MFM (2011 – 2014) – BUSINESS LAW PAGE 15 OF 82
  17. 17. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT External Risk Factors  Significant differences exist between Indian GAAP and other accounting principles, such as US GAAP and IFRS, which may be material to investor’s assessment of Company's financial condition.  Multiplicity of legislations, taxes and levies in addition to changes in legislation, including changes in direct and indirect tax policies, or policies applicable to us could adversely affect our results of operations.  The retail sector is subject to extensive foreign exchange regulations  Natural calamities could have a negative impact on the Indian economy and cause Company's business to suffer.  The price of our Equity Shares may be highly volatile, or an active trading market for our Equity Shares may not develop. Our opinion Internal and External Risks involved in both the Businesses should be carefully reviewed before investing. On prima facie, these risks are associated with the business and will not cause any adverse effects on the performance of the Company. However, overcapacity in the industry is expected to limit the demand for rollout of new towers. Further, regulatory changes and the resultant uncertainty pose a risk to telecom players as their network rollout plans could be hampered. We believe that long term contracts of Bharti Infratel Limited with leading wireless service providers give strong revenue visibility in future. The company enjoys market leader position in both tower market share and tenancy. High capital requirement and comprehensive technology are major entry barriers for new entrants and it reduces risk for Bharti Infratel on operational front. On comparing the risks involved in both the IPOs, Bharti Infratel is better because the level of risks in Bharti Infratel is less than that in V-Mart Retail as there is no supplier agreement and also the share price is trading below the issue price. MFM (2011 – 2014) – BUSINESS LAW PAGE 16 OF 82
  18. 18. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 3. Capital Structure SEBI Requirements Clause no. 6.8.3.1 The capital structure shall be presented in the following manner: a) Authorised, issued, subscribed and paid up capital (Number of instruments, description and aggregate nominal value). b) Size of the present issue, giving separately promoters’ contribution, firm allotment/ reservation for specified categories and net offer to public (Number of instruments, description, aggregate nominal value and issue amount shall be given in that order; Name(s) of group companies to be given, in case reservation has been made for shareholders of the group companies; Applicable percentages may be given in case of book built issue). c) Paid-up Capital: i) After the issue. ii) After conversion of securities (if applicable). d) Share Premium Account (before and after the issue). Bharti Infratel Limited Table 2: Capital Structure of Bharti Infratel Limited Aggregate value at face value (Rs.) Descriptions A Authorized share capital 3,500,000,000 Equity Shares of Rs. 10 each B 35,000,000,000 Issued, subscribed and paid-up capital before the issue 1,742,408,730 Equity Shares of Rs. 10 each C Aggregate value at Issue Price (Rs.) 17,424,087,300 Present issue in terms of the Red Herring Prospectus Issue of 188,900,000 Shares of Rs. 10 each Equity 1,889,000,000 41,723,064,500 Fresh Issue of 146,234,112 Equity Shares of Rs. 10 each 1,462,341,120 32,299,286,855 Offer for Sale of 42,665,888 Equity Shares of Rs. 10 each 426,658,880 9,423,777,644 Of which: D Securities premium account Before the Issue 35,968,912,700 After the Issue 66,805,858,435.88 MFM (2011 – 2014) – BUSINESS LAW PAGE 17 OF 82
  19. 19. MET LEAGUE OF COLLEGES Descriptions E A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Aggregate value at face value (Rs.) Aggregate value at Issue Price (Rs.) Issued, subscribed and paid-up capital after the issue 1,888,642,842 Equity Shares of Rs. 10 each 18,886,428,420 V-Mart Retail Limited Table 3: Capital Structure of V-Mart Retail Limited Particulars Nominal Value (Rs.) A Aggregate value at Issue Price (Rs.) Authorised Capital 200,000,000 - - - 151,980,000 - - - Fresh Issue of 2,761,000 Equity Shares of Rs. 10 each 27,610,000 579,810,000 Offer for Sale of 1,735,000 Equity Shares of Rs. 10 each 17,350,000 364,350,000 Total Issue of 4,496,000 Equity Shares of Rs. 10 each 44,960,000 944,160,000 - - - - - - - - - - - - 20,000,000 Equity Shares of the face value of Rs. 10 each B Issued, Subscribed and Paid Up Share Capital before the Issue 15,197,778 Equity Shares of Rs. 10 each C Present Issue in terms of the Prospectus Which comprises QIB Portion 2,248,000 Equity Shares of which: Anchor Investor Portion Upto 674,400 Equity Shares Net QIB Portion 1,573,600 Equity Shares, of which: Mutual Fund Portion Upto 78,680 Equity Shares Balance for all QIBs including Mutual Funds Upto 1,494,920 Equity Shares Non-Institutional Portion MFM (2011 – 2014) – BUSINESS LAW PAGE 18 OF 82
  20. 20. MET LEAGUE OF COLLEGES Particulars A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Nominal Value (Rs.) Aggregate value at Issue Price (Rs.) Not less than 674,400 Equity Shares Retail Portion - - - - 179,590,000 - - - 392,360,000 - 1,291,560,000 - Not less than 1,573,600 Equity Shares D Issued, Subscribed and Paid Up Equity Share Capital after the Issue 17,958,778 Equity Shares of Rs. 10 each E Securities Premium Account Before the Issue After the Issue MFM (2011 – 2014) – BUSINESS LAW PAGE 19 OF 82
  21. 21. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 4. Object of the Issue SEBI Requirements Clause 6.8.4 The object of raising funds through the issue, that is whether for fixed asset creation and/ or for working capital or any other purpose, shall be disclosed clearly in the prospectus. (Further, a disclosure to the effect that activities proposed to be undertaken by the issuer out of the funds raised in the present issue fall within the main objects listed in the Memorandum of Association or other charter or instrument governing the issuer shall be made in the prospectus.) Bharti Infratel Limited The Company proposes to utilise the funds which are being raised through the Fresh Issue towards funding the following objects: (a) Installation of 4,813 new towers; (b) Upgradation and replacement on existing towers; (c) Green initiatives at tower sites; and (d) General corporate purposes In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges. Issue Proceeds and Net Proceeds The details of the proceeds of the Issue are summarised in the table below: Particulars Amount (Rs. in Million) Gross Proceeds from the Issue 41,723.10 (Less) Issue related expenses 852.9 (Less) Offer for Sale portion 9,423.80 Net proceeds of the Fresh Issue (“Net Proceeds”) 31,446.40 U Utilisation of the Net Proceeds The proposed utilisation of the Net Proceeds is set forth in the table below: Particulars Amount (Rs. in Million) Installation of 4,813 new towers 10,865.60 Upgradation and replacement on existing towers 12,140.80 Green initiatives at tower sites 6,393.60 General corporate purposes 2,046.40 Total Net Proceeds 31,446.40 MFM (2011 – 2014) – BUSINESS LAW PAGE 20 OF 82
  22. 22. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The fund requirements for the Objects and the indicative number of towers proposed to be installed, upgraded and those proposed for green initiatives are based on internal management estimates. Deployment of Net Proceeds The fund requirements in respect of installation of new towers, upgradation and replacement on existing towers and green initiatives at the tower sites operated by the Company as described below are proposed to be entirely funded from the Net Proceeds. The Net Proceeds are currently expected to be deployed in accordance with the schedule set forth below: (in Million) Activity Total FY 2014 FY 2015 FY 2016 Installation of 4,813 new towers 10,866 5,071 4,253 1,541 Upgradation and replacement on existing towers 12,141 5,049 5,307 1,785 Green initiatives at tower sites 6,394 2,991 2,768 634 General corporate purposes 2,046 1,023 1,023 - V-Mart Retail Limited The objects of the Issue are to finance company’s expansion plans, part sale of equity shares of the Selling Shareholder and achieve the benefits of listing on the Stock Exchanges. Companies believe that listing will enhance their corporate image and brand name. The Issue comprises of a Fresh Issue by the Company and an Offer for Sale by the Selling Shareholder. Offer for Sale Company will not receive any proceeds from the Offer for Sale by the Selling Shareholder. Objects of the Fresh Issue Company proposes to utilise the funds, which are being raised through the Fresh Issue towards the following objects: a) To open 60 new stores; b) Expansion of distribution centres; c) Working capital requirements; d) General Corporate Purposes; and e) To meet the Issue expenses. MFM (2011 – 2014) – BUSINESS LAW PAGE 21 OF 82
  23. 23. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The main object clause of Memorandum of Association of the Company enables them to undertake the existing activities and the activities for which the funds are being raised by us through the Fresh Issue. Fresh Issue Proceeds and Net Proceeds The details of the proceeds of the Fresh Issue are set forth in the table below: Amount (Rs. in million) Sr. No. Particulars 1. Gross proceeds to be raised through the Fresh Issue (“Fresh Issue Proceeds”) 579.81 2. Public Issue Expenses 73.16 Net Proceeds of the Fresh Issue (Net Proceeds) 506.65 Utilisation of Net Proceeds The requirement of funds, as estimated by our management, is set forth in the table below: (Rs. in million) Estimated Amount to be utilized from Net Proceeds, Pre-IPO Placement and Internal Accruals Particulars Total Estimated Cost Fiscal 2013 Fiscal 2014 Fiscal 2015 Amount deployed as on December 15, 2012 Estimated Balance Amount to be utilized from PreIPO Placement, Net Proceeds and Internal Accruals (A) To open 60 new stores 697.04 119.92 285.53 291.59 44.62 652.42 (B) Expansion of distribution centres 43.87 9.09 17.18 17.6 0.49 43.38 (C) Working Capital 100.00 100 - - - 100.00 (D) General Corporate Purpose - - - - - Total 840.91 229.01 302.71 45.11 795.8 MFM (2011 – 2014) – BUSINESS LAW 309.19 PAGE 22 OF 82
  24. 24. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The fund requirements of the Objects of the Issue are based on the estimates of the management and the Company’s current business plan and have not been independently appraised by any bank or financial institution. These are based on current conditions and are subject to change due to changes in external circumstances or costs, or in other financial conditions, business or strategy. Further, they operate in a highly competitive and dynamic market condition and may have to revise estimates from time to time on account of external circumstances or costs and financial condition, business or strategy. Consequently, our fund requirements may also change accordingly. Any such change in plans may require rescheduling of expenditure programs and increasing or decreasing expenditure for a particular object vis-à-vis the utilisation of Net Proceeds of the Fresh Issue. In the event of variations in the actual utilisation of funds earmarked for the purposes set forth above, increased fund requirements for a particular purpose may be financed by surplus funds, if any, available in respect of the other purposes for which funds are being raised in the Issue. If surplus funds are unavailable, the required financing will be done through internal accruals, through cash flow from our operations and/or debt, as required. Surplus, if any, from the Net Proceeds remaining unutilized for specific purposes shall be used for General Corporate Purposes and which amount shall not exceed 25% of the Fresh Issue. Shortfall of Net Proceeds In case of a shortfall of Net Proceeds of the Fresh Issue, we intend to meet the same through internal accruals. The gross proceeds to be raised from this Issue also include the amount received pursuant to the Pre-IPO Placement. In the event that the estimated utilisation out of the Net Proceeds of the Fresh Issue in a Fiscal is not completely met, the same shall be utilised in the next Fiscal. Company proposes to meet expenditure towards the Objects of the Issue entirely out of the proceeds of the Issue and internal accruals. Means of Finance Sr. No. Particulars Amount in Rs. million 1 Net Proceeds from the Fresh Issue 506.65 2. Pre-IPO Placement 262.50 3. Internal accruals 71.76 Total 840.91 MFM (2011 – 2014) – BUSINESS LAW PAGE 23 OF 82
  25. 25. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Our opinion Bharti Infratel Limited is generating the fund of Rs. 31,446 million for installation of new towers and upgrading its existing towers. Out of this only Rs. 10,865 million (35%) is being utilizing for expansion of business (Installing New Tower). Entire estimated costs for installation of new towers and upgradation and replacement on existing towers are generated through issue of this offer, Bharti Infratel is not using internal accrual of funds to meet objectives. V Mart Retails Limited’s expected cost for this objective is Rs. 840.91 million out of which company is generating Rs. 506.65 million through this issue. The company has also generated amount of Rs. 262.50 million through Pre-IPO placement and Rs. 71.76 million though internal accruals. The company has already deployed Rs. 45.11 million as on Dec 2012. The company has targeted opening of 25 stores each in FY14 and FY15, which in our opinion, is aggressive given that in the past five years it has opened an average of 12 stores per annum. Hence, the utilization of the IPO proceeds may well be spread over the next three to four years, thereby suppressing RoE post the IPO for the coming two fiscal years. MFM (2011 – 2014) – BUSINESS LAW PAGE 24 OF 82
  26. 26. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 5. Basis of issue price SEBI Requirements The basis for issue price/ floor price/ price band shall be disclosed and justified on the basis of the following information, which shall be also disclosed separately:  Earnings Per Share, i.e., EPS pre-issue for the last three years, P/E pre-issue., Average Return on Net Worth in the last three years., Minimum Return on Increased Net Worth required to maintain preissue EPS. Net Asset Value per share based on last balance sheet., Net Asset Value per share after issue and comparison thereof with the issue price.,  Comparison of all the accounting ratios of the issuer company as mentioned above with the industry average and with the accounting ratios of the peer group.  The face value of shares (including the statement about the issue price/ floor price/ price band being “X” times of the face value). Bharti Infratel Limited The Issue Price has been determined by the Company in consultation with the JCBRLMs, BRLMs and CBRLMs on the basis of an assessment of market demand for the offered Equity Shares by the book building process and on the basis of the following qualitative and quantitative factors. The Issue Price is 22 times the face value of Equity Shares, the Cap Price is 24 times and the Floor Price is 21 times the face value of Equity Shares. Qualitative Factors Competitive Strengths The Company believes that it has the following competitive strengths: a) A leading telecommunications infrastructure operator in India, with large scale, nationwide operations in an industry with entry barriers; b) Extensive presence in telecommunications Circles with high growth potential; c) Long term contracts with the leading wireless telecommunications service providers in India, providing visibility on future revenues; d) Comprehensive deployment and operational experience supported by well-developed processes, systems and IT infrastructure; e) Strong financial position and access to capital; f) Relationship with the Bharti group; g) Indus’ relationship with three wireless service providers; and h) Experienced management team. MFM (2011 – 2014) – BUSINESS LAW PAGE 25 OF 82
  27. 27. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Quantitative Factors Information presented in this section is derived from the restated unconsolidated and consolidated financial information prepared in accordance with the Companies Act and SEBI Regulations. Some of the quantitative factors which may form the basis for computing the Issue Price are as follows: 1. Basic and Diluted Earnings per Share (“EPS”) As per the Company’s restated unconsolidated financial statements: Year Ended March 31 Basic EPS Diluted EPS Weight 2012 2.568 2.562 3 2011 2.058 2.055 2 2010 1.657 1.617 1 Weighted Average 2.246 2.236 The Basic and Diluted EPS on an unconsolidated basis for the six month period ended September 30, 2012 was Rs. 3.811 and Rs. 3.802 respectively (not annualised) As per the Company’s restated consolidated financial statements: Year Ended March 31 Basic EPS Diluted EPS Weight 2012 4.309 4.299 3 2011 3.165 3.16 2 2010 1.557 1.519 1 Weighted Average 3.469 3.456 The Basic and Diluted EPS on a consolidated basis for the six month period ended September 30, 2012 was Rs. 2.643 and Rs. 2.637 respectively (not annualised). 2. Price Earnings Ratio (P/E) in relation to the Issue price of Rs. 220* per Equity Share: Sr. No. 1 Particulars Consolidated Unconsolidated P/E ratio based on Basic EPS for the year ended March 31, 2012 at the Issue Price: 51.1 85.7 * A discount of Rs. 10 to the Issue Price has been offered to Retail Individual Bidders. MFM (2011 – 2014) – BUSINESS LAW PAGE 26 OF 82
  28. 28. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT 3. Price Earnings Ratio (P/E) in relation to the Cap Price and Floor Price: S. No Particulars Consolidated Unconsolidated 1 P/E ratio based on Basic EPS for the year ended March 31, 2012 at the Floor Price: 48.7 81.8 2 P/E ratio based on Basic EPS for the year ended March 31, 2012 at the Cap Price: 55.7 93.5 4. Return on Net Worth (RoNW) Year ended March 31 Consolidated (%) Unconsolidated (%) Weight 2012 5.2% 3.0% 3 2011 3.9% 2.5% 2 2010 1.9% 1.9% 1 Weighted Average 4.2% 2.7% The Return on Net Worth on a consolidated and unconsolidated basis for the six month period ended September 30, 2012 was 3.2% and 4.5% respectively (not annualised). 5. Minimum Return on Total Net Worth after Issue needed to maintain Pre-Issue EPS for the year ended March 31, 2012 Based on Basic EPS:  At the Issue Price – 2.7% and 4.6% based on Restated Unconsolidated and Consolidated financial information respectively.  At the Floor Price – 2.7% and 4.6% based on Restated Unconsolidated and Consolidated financial information respectively.  At the Cap Price – 2.7% and 4.5% based on Restated Unconsolidated and Consolidated financial information respectively. Based on Diluted EPS:  At the Issue Price – 2.7% and 4.6% based on Restated Unconsolidated and Consolidated financial information respectively.  At the Floor Price – 2.7% and 4.6% based on Restated Unconsolidated and Consolidated financial information respectively.  At the Cap Price – 2.7% and 4.5% based on Restated Unconsolidated and Consolidated financial information respectively. MFM (2011 – 2014) – BUSINESS LAW PAGE 27 OF 82
  29. 29. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT 6. Net Asset Value (NAV)        NAV per Equity Share (Consolidated) as at September 30, 2012: Rs. 82.1 per Equity Share NAV per Equity Share (Unconsolidated) as at September 30, 2012: Rs. 85.3 per Equity Share NAV per Equity Share after adjusting for the proportionate change in the number of Equity Shares on account of bonus issue (Consolidated) as at September 30, 2012: Rs. 82.1 per Equity Share NAV per Equity Share after adjusting for the proportionate change in the number of Equity Shares on account of bonus issue (Unconsolidated) as at September 30, 2012: Rs. 85.3 per Equity Share Issue price: Rs. 220 per Equity Share (A discount of Rs. 10 to the Issue Price has been offered to Retail Individual Bidders) NAV (Consolidated) after the Issue: Rs. 92.8 per Equity Share NAV (Unconsolidated) after the Issue: Rs. 95.8 per Equity Share Note: Net Asset Value per Equity Share has been computed as net worth at the end of the period divided by total number of equity shares outstanding at the end of the period 7. Comparison with Listed Industry Peers There are no listed companies in India that engage in a business similar to that of the Company. Hence, it is not possible to provide an industry comparison in relation to the Company. 8. The Issue price is 22 times of the face value of the Equity Shares. V-Mart Retail Limited The price band was decided by Company and Selling Shareholder in consultation with the BRLM and advertised at least five Working Days prior to the Bid/ Issue Opening Date. The Issue Price has been determined by Company and the Selling Shareholder in consultation with the BRLM on the basis of an assessment of market demand for the offered Equity Shares by the book building process and on the basis of the following qualitative and quantitative factors. The face value of the Equity Shares of Company is Rs.10 each and the Issue Price is 21 times the face value. MFM (2011 – 2014) – BUSINESS LAW PAGE 28 OF 82
  30. 30. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Qualitative Factors Competitive strengths           First mover advantage in Tier-II and Tier-III cities and to target the expanding “aspiring class” and “middle class” customer group; Competitive lease rentals; Strong and diversified procurement network; Efficient supply chain management; Strong IT infrastructure, systems and processes; Pleasant ambience and a modern shopping environment; One stop family shop with a large variety of products, adopting store Concept Classification, customized for the local populace; Strong background and experience in the retail industry of our Individual Promoters and our key managerial team; Strong and diverse project execution expertise; and Inverted hierarchy model. Quantitative Factors The information presented in this section for the financial years ended March 31, 2012; March 31, 2011; and March 31, 2010 and for the eight months ended November 30, 2012; is derived from Restated Summary Statements prepared in accordance with Indian GAAP. Investors should evaluate Company taking into consideration its earnings and based on its growth strategy. Some of the quantitative factors which may form the basis for computing the price are as follows: 1) Basic and Diluted Earnings per Share (EPS) Year ended Basic EPS Diluted Weight EPS March 31, 2010 1.79 1.68 1 March 31, 2011 4.75 4.75 2 March 31, 2012 7.92 7.92 3 Weighted Average 5.84 5.82 For the eight months ended November 30, 2012 9.38 9.38 8.61 8.61 For the eight months ended November 30, 2012 (After considering the Pre-IPO Placement) * * 1,250, 000 Equity Shares were allotted on January 6, 2013 as Pre-IPO Placement. MFM (2011 – 2014) – BUSINESS LAW PAGE 29 OF 82
  31. 31. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Note:  The basic and diluted EPS have been calculated in compliance with Accounting Standard 20 issued by the Institute of Chartered Accountants of India.  Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of Equity Shares outstanding during the period.  The face value of each Equity Share is Rs 10 each. 2) Price / Earning (P/E) Ratio in relation to Issue Price of Rs 210 Sr. No. Particulars P/E at Floor P/E at Cap Price Rs. 195 Price Rs. 215 P/E at Issue Price Rs. 210 a) Based on Basic EPS of March 31, 2012 24.62 27.15 26.52 b) Based on weighted average Basic EPS 33.39 36.82 35.96 Industry P/E Multiple: from SEBI website Highest - 189.83 Lowest - 20.71 Average - 105.27 3) Average Return on Net Worth (RONW): Particulars RONW % Weight Year ended March 31, 2010 6.20 1 Year ended March 31, 2011 14.26 2 Year ended March 31, 2012 20.20 3 Weighted Average 15.89 For the eight months period ended November 30, 2012 19.31 For the eight months period ended November 30, 2012 13.92 (After considering the Pre-IPO Placement)* * 1,250,000 Equity Shares were allotted on January 6, 2013 as Pre-IPO Placement. The net worth has been considered after Pre-IPO Placement. 4) Minimum return on increased net worth required for maintaining pre-issue EPS at March 31, 2012 a) At the higher end of the price band 9.28 % b) At the lower end of the price band 9.62 % c) At the Issue Price 9.36 % MFM (2011 – 2014) – BUSINESS LAW PAGE 30 OF 82
  32. 32. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT 5) Net Asset Value (NAV) per Equity Share Particulars Amount (Rs) NAV per Equity Share as of March 31, 2010 54.77 NAV per Equity Share as of March 31, 2011 59.87 NAV per Equity Share as of March 31, 2012 74.44 NAV per Equity Share as of March 31, 2012 (after considering Bonus Issue on June 15, 2012)* 39.18 NAV per Equity Share as of November 30, 2012 48.56 NAV per Equity Share as of November 30, 2012 (After considering the Pre-IPO Placement)** 61.83 Issue Price per Equity Share 210.00 6) Comparison of Accounting Ratios with Industry Peers Name of the company Financial year ended Standalone / Consolidated Face Value (Rs.) EPS (Rs.) Book Value RONW per (%) Equity Share (Rs.) Current Market Price P/E Ratio V-Mart Retail Limited Pre-Issue (after issue of bonus Equity Shares) 31-Mar-12 Standalone 10 7.92 20.2 39.18 Not 26.52 Applicable Shoppers Stop Limited 31-Mar-12 Consolidated 5 2.31 3.68 62.5 438.5 Pantaloon Retail (India) Limited 30-Jun-11 Standalone 2 12.75 8.47 156.08 264 20.71 Trent Limited 31-Mar-12 Consolidated 10 -3.24 16.59 427.14 1,265.80 -76.3 Peer Group 189.83 7) The Issue price will be 21 times of the face value of the Equity Shares. The Issue Price has been determined by Company and Selling Shareholder in consultation with the BRLM on the basis of the demand from investors for the Equity Shares through the Book Building Process. MFM (2011 – 2014) – BUSINESS LAW PAGE 31 OF 82
  33. 33. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 6. Promoter Contribution SEBI Requirements 4.1. Promoters’ Contribution in a Public Issue by Unlisted Companies 4.1.1. In a public issue by an unlisted company, the promoters shall contribute not less than 20% of the post issue capital. 4.2. Promoters’ Shareholding in Case of Offers for Sale 4.2.1. The promoters’ shareholding after offer for sale shall not be less than 20% of the post issue capital. Promoters’ Contribution in Case of Public Issues by Listed Companies 4.3.1. In case of public issues by listed companies, the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue shareholding to the extent of 20% of the post-issue capital. 4.3. 4.4. Promoters’ Contribution in Case of Composite Issues 4.4.1. In case of composite issues of a listed company, the promoters’ contribution shall at the option of the promoter(s) be either 20% of the proposed public issue or 20% of the post-issue capital. Bharti Infratel Limited As on the date of this Prospectus, the Promoter holds 1,500,000,000 Equity Shares, equivalent to 86.09% of the issued, subscribed and paidup Equity Share capital of the Company. Set forth below is the buildup of the shareholding of the Promoter in the Company since the incorporation of the Company: Table 4: Promoter's Contribution of Bharti Infratel Limited Date of Transaction November 30, 2006 Nature of Transaction No. of Equity Shares Allotment to 50,000 the Promoter and its nominees pursuant to subscription to the MoA MFM (2011 – 2014) – BUSINESS LAW Nature of conside ration Cash % of the pre- Issue Capital (%) Negligible % of the post- Issue Capital (%) Negligible PAGE 32 OF 82
  34. 34. MET LEAGUE OF COLLEGES Date of Transaction A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Nature of Transaction No. of Equity Shares 499,950,000 Nature of conside ration N.A. August 21, 2008 Bonus issue August 23, 2012 Total Bonus issue % of the pre- Issue Capital (%) 28.69 26.47 1,000,000,000 N.A. 57.40 52.95 86.09 79.42 1,500,000,000 % of the post- Issue Capital (%) All the Equity Shares held by the Promoter were fully paid-up on the respective dates of acquisition of such Equity Shares. None of the Equity Shares held by the Promoter are pledged. Post-Issue Pre-Issue Figure 5: Shareholding Pattern before and after Issue for Bharti Infratel Limited V-Mart Retail Limited Table 5: Promoter's Contribution of V-Mart Retail Limited Pre Issue No. of Shares % holding Post Issue No. of Shares % holding Lalit Agarwal 2,194,025 14.44 2,194,025 12.22 Hemant Agarwal 579,500 3.81 579,500 3.23 Madan Agarwal 686,375 4.52 686,375 3.82 Madan Gopal Agarwal (HUF) 1,041,675 6.85 1,041,675 5.80 Lalit M. Agarwal (HUF) 1,277,275 8.40 1,277,275 7.11 Hemant Agarwal (HUF) 423,985 2.79 423,985 2.36 Total (A) 6,202,835 40.81 6,202,835 34.54 2,172,175 14.29 2,172,175 12.10 Sr. No. Particulars A. Promoters B. Promoter Group Sangeeta Agarwal MFM (2011 – 2014) – BUSINESS LAW PAGE 33 OF 82
  35. 35. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Uma Devi Agarwal Pre Issue No. of Shares 1,355,460 Smiti Agarwal % holding 8.92 Post Issue No. of Shares 1,355,460 % holding 7.55 834,005 5.49 834,005 4.64 Total (B) 4,361,640 28.70 4,361,640 24.29 Total of Promoters and Promoter Group (A+B) Sr. No. 10,564,475 69.51 10,564,475 58.83 Particulars Pre-Issue Post-Issue Figure 6: Shareholding Pattern before and after Issue for V Mart Retail Limited Our opinion In Bharti Infratel Limited Promoter’s contribution in Post-Issue Capital is 79.42% which is only 8% less than pre- Issue Capital of 86.09%. Wherein V Mart Retails Limited Promoter’s contribution in Post-Issue Capital is58.83% which is only 15% less than pre- Issue Capital of 69.51%. In both the companies promoter’s contribution after post-issue is less than 20% therefore both the companies are complying with the requirements of SEBI guideline. However Bharti Infratel Limited is reducing promoter’s contribution by only 8% compare to 15% of V Mart Retail Limited. The promoter holding post issue is more in Bharti (80%) than in V-Mart (60%), which influences an investors confidence towards that particular company and therefore Bharti Infratel Limited is reasonably better looking Issue than the other. MFM (2011 – 2014) – BUSINESS LAW PAGE 34 OF 82
  36. 36. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 7. Lock-in requirement SEBI Requirements 4.11.1 In case of any issue of capital to the public the minimum promoters’ contribution shall be locked in for a period of 3 years. 4.12.1 In case of a public issue by unlisted company, if the promoters’ contribution in the proposed issue exceeds the required minimum contribution, such excess contribution shall also be locked in for a period of (one year). 4.14.1 (The entire pre-issue capital, other than that locked-in as minimum promoters’ contribution, shall be locked-in for a period of one year from the date of allotment (in the proposed public issue). 4.16.1 (Inter-se Transfer of Locked- in Securities) held by the Promoter /person other than the promoters, prior to Initial Public Offering (IPO), may be transferred to other Promoter / other shareholder subject to continuation of lock-in in the hands of transferees for the remaining period. 4.17.1 The securities which are subject to lock-in shall carry inscription `nontransferable’ along with duration of specified non-transferable period mentioned in the face of the security certificate. Bharti Infratel Limited Pursuant to the SEBI Regulations, an aggregate of 20% of the post-Issue Equity Share capital of the Company shall be locked in by the Promoter for a period of three years from the date of Allotment. All Equity Shares of the Company held by the Promoter are eligible for Promoter’s contribution. Accordingly, 379,584,800 Equity Shares, aggregating up to 20% of the postIssue capital of the Company held by the Promoter, shall be locked in for a period of three years from the date of Allotment in the Issue. Details of the same are as follows: MFM (2011 – 2014) – BUSINESS LAW PAGE 35 OF 82
  37. 37. MET LEAGUE OF COLLEGES Date of Transaction and when made fully paid-up A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Percentage of postIssue paidup capital (%) 21, 50,000 10 10 Negligible Bonus issue 379,534,800 10 - 20.00 Total August 2008 Face Value (in Rs) Allotment pursuant to subscription to the MoA November 30, 2006 No. of Equity Shares Issue/acquis ition price per Equity Share (Rs) 379,584,800 Nature of Transaction 20.00 The Promoter’s contribution has been brought in to the extent of not less than the specified minimum lot and from the person defined as ‘promoter’ under the SEBI Regulations. The Equity Shares that are being locked-in are not ineligible for computation of Promoter’s contribution under SEBI Regulations. Details of Equity Shares locked-in for one year Other than the above Equity Shares that are locked in for three years, the entire pre-Issue Equity Share capital of the Company, except the Equity Shares offered in the Offer for Sale and any Equity Shares issued upon exercise of employee stock options granted by the Company, comprising 1,320,158,042 Equity Shares would be locked-in for a period of one year from the date of Allotment. As of the date of this Prospectus, none of the employee stock options granted by the Company have been converted into Equity Shares. Lock-in of Equity Shares to be Allotted, if any, to the Anchor Investor Any Equity Shares allotted to Anchor Investor Portion shall be locked-in for a period of 30 days from the date of Allotment. Other requirements in respect of lock-in: The Equity Shares held by the Promoter which are locked-in for a period of one year may be pledged only with scheduled commercial banks or public financial institutions as collateral security for loans granted by such banks or public financial institutions, provided that such pledge of the Equity Shares is one of the terms of the sanction of the loan. The Equity Shares held by persons other than the Promoter prior to the Issue may be transferred to any other person holding Equity Shares which are locked-in, subject to the continuation of the lock-in in the hands of transferees for the remaining period and compliance with the SEBI Takeover Regulations. MFM (2011 – 2014) – BUSINESS LAW PAGE 36 OF 82
  38. 38. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The Equity Shares held by the Promoter may be transferred to any person of the Promoter Group or to any new promoter or persons in control of the Company, subject to continuation of the lock-in in the hands of the transferees for the remaining period and compliance with the SEBI Takeover Regulations. V-Mart Retail Limited a) Details of the Promoters contribution locked in for three years: Pursuant to SEBI Regulations, an aggregate of 20% of the fully diluted postIssue paid up Equity Share capital of Company held by the Promoters shall be locked in for a period of three years from the date of Allotment of Equity Shares in the Issue (“Minimum Promoters Contribution”) and the Promoters shareholding in excess of 20% shall be locked-in for a period of one year. The details of such lock-in are given below: Details of the Minimum Promoters Contribution locked in for three years Date of allotment / acquisition No. of Equity shares locked in Percentage of postIssue paid up capital (%) Lalit Agarwal 1,016,180 5.66 Hemant Agarwal 268,400 1.49 Madan Agarwal 410,463 2.29 Madan Gopal Agarwal (HUF) 729,173 4.06 Lalit M. Agarwal (HUF) 894,093 4.98 Hemant Agarwal HUF 296,790 1.65 Total 3,615,099 20.13 b) The Equity Shares that are being locked-in are not in-eligible for computation of Promoter’s contribution under SEBI Regulations. In this connection, company confirm the following:  The Equity Shares offered for minimum 20% Promoters contribution have not been acquired in the last three years for consideration out of revaluation of assets or capitalization of intangible assets or bonus shares out of revaluation reserves, or unrealised profits of Company or from a bonus issue against Equity Shares which are otherwise ineligible for computation of Promoters contribution. The Promoters contribution of 20% of the post -Issue capital does not include Equity Shares allotted to our Promoters for consideration other than cash. MFM (2011 – 2014) – BUSINESS LAW PAGE 37 OF 82
  39. 39. MET LEAGUE OF COLLEGES     A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The Equity Shares offered for minimum 20% Promoters contribution do not include any Equity Shares acquired during the preceding one year at a price lower than the price at which the Equity Shares are being offered to the public in the Issue; The Equity Shares offered for minimum 20% Promoters contribution were not issued to the Promoters upon conversion of a partnership firm; The Equity Shares offered for minimum 20% Promoters contribution are not subject to any pledge; and In terms of undertaking executed by our Promoter, Equity Shares forming part of Promoter’s contribution subject to lock in will not be disposed/ sold/ transferred by our Promoter during the period starting from the date of filing of the Draft Red Herring Prospectus with SEBI till the date of commencement of lock-in period as stated in the Prospectus. The Minimum Promoters Contribution has been brought to the extent of not less than the specified minimum lot and from persons defined as Promoter under the SEBI Regulations. Company has obtained consents from Promoters for the lock-in of 3,615,099 Equity Shares, held by them, for a period of 3 years from the date of Allotment in the Issue and for lock in of the balance pre-Issue Equity Share capital of Company, held by the Promoters and Promoter Group, for a period of 1 year from the date of Allotment in the Issue. Equity Shares offered by the Promoters for the minimum Promoter’s contribution are not subject to pledge. Other than the Equity Shares locked-in as Promoters contribution for a period of three years as stated in the table above, the entire pre-Issue capital of Company, with the exception of Equity Shares which are proposed to be transferred as part of the Offer of Sale, including the excess of Minimum Promoters Contribution, as per SEBI Regulations, shall be locked in for a period of one year from the date of Allotment of Equity Shares in the Issue. c) Details of share capital locked in for one year The entire pre-Issue equity share capital of Company shall be locked-in for a period of one year from the date of Allotment in the Issue. The details of the Equity Shares locked in for one year are as follows: Name of the Shareholder Number of Equity Shares of the face value of Rs. 10 each allotted Naman Finance and Investment Private Limited 1,569,136 Lalit Agarwal 1,177,845 Sangeeta Agarwal 2,172,175 MFM (2011 – 2014) – BUSINESS LAW PAGE 38 OF 82
  40. 40. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Name of the Shareholder Number of Equity Shares of the face value of Rs. 10 each allotted Uma Devi Agarwal 1,355,460 Lalit M. Agarwal (HUF) 383,182 Madan Gopal Agarwal (HUF) 312,502 Smiti Agarwal 834,005 Madan Agarwal 275,912 Hemant Agarwal 311,100 Hemant Agarwal (HUF) 127,195 Writers and Publishers Private Limited 79,167 Antique Finsec Private Limited 100,000 Antique Stock Broking Limited 525,000 Four Dimensions Securities (India) Limited 52,000 Lata Manek Bhanshali 240,000 Merit Credit Corporation Limited 100,000 Tejal Rohit Kothari 233,000 Total 9,847,679 d) Lock-in of Equity Shares to be issued, if any, to Anchor Investor(s) Further, any Equity Shares Allotted to Anchor Investors in the Anchor Investor Portion shall be locked-in for a period of 30 days from the date of Allotment. Our opinion Pursuant to the SEBI Regulations, an aggregate of 20% of the post-Issue Equity Share capital of the Company shall be locked in by the Promoter for a period of three years from the date of Allotment. Accordingly, Bharti Infratel Limited locked in Equity Shares of 379,584,800, aggregating up to 20% of the post-Issue capital of the Company held by the Promoter, for a period of three years from the date of Allotment in the Issue. And V Mart Retail Limited locked in Equity Shares of 3,615,099, aggregating up to 20.13% of the post-Issue capital of the Company held by the Promoter, for a period of three years from the date of Allotment in the Issue MFM (2011 – 2014) – BUSINESS LAW PAGE 39 OF 82
  41. 41. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 8. Management SEBI Requirements 6.42.9.1 Name, age, qualifications, Director Identification Number, experience, address, occupation and date of expiration of the current term of office of manager, managing director, and other directors (including nominee directors, whole-time directors), giving their directorships in other companies. 6.42.9.2 The nature of any family relationship between any of the directors. 6.42.9.3 Any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which of the directors was selected as a director or member of senior management. 6.42.9.4 Details of service contracts entered into by the directors with the issuer company providing for benefits upon termination of employment and a distinct negative statement in the absence of any such contract. Bharti Infratel Limited Under the Articles of Association, the Company is required to have not less than three Directors. As on the date of this Prospectus, the Board comprises of ten Directors. The following table sets forth details of the Board as of the date of filing the Red Herring Prospectus: Table 6: Management details of Bharti Infratel Limited S. No. 1. Name, Designation, Father’s Name, Address, Nationality, Term, Occupation and DIN Rakesh Bharti Mittal Father’s Name: Sat Paul Mittal Designation: Chairman, non-independent and nonexecutive Director Address: E-26, Vasant Marg, Vasant Vihar, New Delhi 110 057 Occupation: Professional Nationality: Indian Term: Liable to retire by rotation DIN: 00042494 Date of appointment: September 3, 2012 MFM (2011 – 2014) – BUSINESS LAW Age (years) 57 PAGE 40 OF 82
  42. 42. MET LEAGUE OF COLLEGES S. No. 2. 3. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Name, Designation, Father’s Name, Address, Nationality, Term, Occupation and DIN Akhil Kumar Gupta Father’s Name: Jagdish Pershad Gupta Designation: Vice Chairman and Managing Director Address: B 27, Maharani Bagh, New Delhi 110 065 Occupation: Service Nationality: Indian Term: Five years with effect from August 1, 2008 DIN: 00028728 Date of appointment: March 31, 2008 Sarvjit Singh Dhillon Father’s Name: Kirpa Dhillon Designation: Non-independent and non- executive Director Address: 102B, 4th Floor, The Aralias, DLF Golf Links, Age (years) 56 46 DLF Phase - 5, Gurgaon, Haryana 122 009 Occupation: Service Nationality: British Term: Liable to retire by rotation DIN: 00275924 Date of appointment: January 2, 2012 4. Sanjay Nayar Father’s Name: Om Prakash Nayar Designation: Non-independent and non- executive Director Address: Flat No. 9, the Rushilla Co- operative Housing Society Limited, 17/C Carmichael Road, Mumbai 400 026 Occupation: Service Nationality: Indian Term: Liable to retire by rotation DIN: 00002615 Date of appointment: January 31, 2011 MFM (2011 – 2014) – BUSINESS LAW 52 PAGE 41 OF 82
  43. 43. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT S. No. Name, Designation, Father’s Name, Address, Nationality, Term, Occupation and DIN Age (years) 5. Narayanan Kumar Father’s Name: Kallidaikurichi Sankaralinga Iyer Narayanan Designation: Independent and non- executive Director Address: 1, George Avenue, Alwarpet, Chennai 600 018 Occupation: Industrialist Nationality: Indian Term: Liable to retire by rotation DIN: 00007848 Date of appointment: April 29, 2008 62 6. Vinod Dhall Father’s Name: Dewan Chand Dhall Designation: Independent and non- executive Director Address: Dewan Manohar House, B-88, Sector 51, Noida 201 301 Occupation: Professional Nationality: Indian Term: Liable to retire by rotation DIN: 02591373 Date of appointment: September 3, 2012 68 7. Jitender Balakrishnan Father’s Name: Manjerikandy Balakrishnan Designation: Independent and non- executive Director Address: 208, Tower-2, Casa Grande, Senapati Bapat Marg, Lower Parel, Mumbai 400 013 Occupation: Professional Nationality: Indian Term: Liable to retire by rotation DIN: 00028320 Date of appointment: September 3, 2012 63 8. Bharat Sumant Raut Father’s Name: Sumant Vasantrao Raut Designation: Independent and non- executive director Address: 8, French Bridge (Raut Bungalow), Mumbai 400 007 Occupation: Professional Nationality: Indian Term: Liable to retire by rotation DIN: 00066080 Date of appointment: September 3, 2012 63 MFM (2011 – 2014) – BUSINESS LAW PAGE 42 OF 82
  44. 44. MET LEAGUE OF COLLEGES S. No. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Name, Designation, Father’s Name, Address, Nationality, Term, Occupation and DIN Age (years) 9. Leena Srivastava Father’s Name: Late Dix Bihari Lal Designation: Independent and non- executive Director Address: L-18/2 DLF Phase II, Gurgaon, Haryana 122 002 Occupation: Service Nationality: Indian Term: Liable to retire by rotation Din: 00005737 Date of appointment: November 5, 2012 52 10. Murray Philip King Father’s Name: Clarence King Designation: Non-independent and non- executive Director Address: 48, Spencer Road, Mosman NSW 2088, Australia Occupation: Service Nationality: Australian Term: Liable to retire by rotation Din: 06415439 Date of appointment: November 5, 2012 53 V-Mart Retail Limited Under the Articles of Association, Company is required to have not less than three directors and not more than twelve directors. Company currently has six Directors on its Board, of which three are Executive Directors and three are Non–Executive Directors. The following table sets forth details regarding our Board of Directors as on the date of the Prospectus: Table 7: Management details of V-Mart Retail Limited Sr. No. Name, Designation, Address, Occupation, Age, DIN and Nationality 1. Lalit Agarwal Chairman and Managing Director Address: B –81, Belvedere Park, DLF Phase 3, Gurgaon –122 002, Haryana, India Occupation: Business MFM (2011 – 2014) – BUSINESS LAW Date of Appointment as Director and Term of Office Date of Appointment: May 30, 2012 Term: Appointed as Managing Director for a period of 5 years from June 01, 2012 to May 31, PAGE 43 OF 82
  45. 45. MET LEAGUE OF COLLEGES Sr. No. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Name, Designation, Address, Occupation, Age, DIN and Nationality Age: 43 years DIN: 00900900 Nationality: Indian 2. 3. 4 5 Hemant Agarwal Whole Time Director Address: D-61, Galaxy Tower, Behind Grand Bhagwati, Bodakdev, Ahemdabad -380 054, Gujarat, India Occupation: Business DIN: 02242019 Age: 41 years Nationality: Indian Madan Agarwal Whole Time Director Address: B –81, Belvedere Park, DLF Phase 3, Gurgaon –122 002, Haryana, India Occupation: Business DIN: 02249947 Age: 69 years Nationality: Indian Krishan Kumar Gupta Director (Non Executive, Independent) Address: C-604, Badhwar Apartments, Sector 6, Plot 3, Dwarka, New Delhi – 110 075, Delhi, India Occupation: Service DIN: 02602767 Age: 65 years Nationality: Indian Aakash Moondhra Director (Non Executive, Independent) Address: BPB-162, Belvedere Park, DLF Phase III, Gurgaon – 122 002, Haryana, India Occupation: Service DIN: 02654599 Age: 39 years Nationality: Indian MFM (2011 – 2014) – BUSINESS LAW Date of Appointment as Director and Term of Office 2017 Date of Appointment: May, 30, 2012 Term: Liable to retire by rotation. Appointed as Whole Time Director for a period of 5 years from June 01, 2012 to May 31, 2017 Date of Appointment: May 30, 2012 Term: Liable to retire by rotation. Appointed as Whole Time Director for a period of 5 years from June 01, 2012 to May 31, 2017 Date of Appointment: March 18, 2010 Term: Liable to retire by rotation Date of Appointment: March 18, 2010 Term: Liable to retire by rotation PAGE 44 OF 82
  46. 46. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Sr. No. Name, Designation, Address, Occupation, Age, DIN and Nationality 6 Kamal Kumar Gupta Director (Non Executive, Independent) Address: House No.144, Sector -28, Faridabad, Haryana. Occupation: Practising Chartered Accountant DIN: 00086057 Age: 49 years Nationality: Indian MFM (2011 – 2014) – BUSINESS LAW Date of Appointment as Director and Term of Office Date of Appointment: July 2, 2012 Term: Liable to retire by rotation PAGE 45 OF 82
  47. 47. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 9. Dividend Policy SEBI Requirements 6.10.2 the rates of dividends, if any, paid by the issuer company in respect of each class of shares in the issuer company for each of the five financial years immediately preceding the issue of the prospectus, 6.13.2 Mode of payment of dividend 6A.14 Dividends 1) Dividend policy of the Company 2) Rate of Dividend and Amount of Dividend paid for the last five financial years 3) Regulatory framework in the Country of Incorporation/share listed concerning Dividends 4) Details of Arrangement with the Depositories for payment of Dividend to the IDR holders 5) Information about changes, if any, in dividends announced and dividends paid and time gap between the dividends announced and dividends paid. 6) Information about Dividend Yield. 7) Taxation aspects of dividend distribution. Bharti Infratel Limited The dividend, if any, will depend on a number of factors, including but not limited to the earnings, capital requirements, contractual restrictions and overall financial position of the Company. Subject to the statutory provisions, as applicable, the Company intends to have a total dividend payout (including dividend distribution and other taxes, cess, levies, if any relating to the dividend) between 30% to 50% of the net profit of the Company for the year or 100% of any dividend received by the Company from its investee company(ies), whichever is higher, subject to adequate liquidity available at the Company to take care of planned business activities and expansion plans, capital expenditure and other uses of such funds including, but not limited to, any debt servicing requirements, acquisitions, and ensuring an acceptable credit rating, as may be determined, by the Board from time to time. MFM (2011 – 2014) – BUSINESS LAW PAGE 46 OF 82
  48. 48. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The Board will review this policy at least once every three financial years keeping in mind the business environment and requirements of the Company, its subsidiaries and joint ventures. The Board has declared interim dividend for Fiscal 2013 as set forth below: Face value per Equity Share: Rs. 10 Dividend declared per Equity Share: Rs. 2.5 Rate of dividend: 25% V-Mart Retail Limited Company does not have any formal dividend policy for the Equity Shares and the declaration and payment of dividend, if any, will depend on a number of factors, including but not limited to the results of operations, earnings, capital requirements and surplus, general financial conditions, contractual restrictions, applicable Indian legal restrictions and other factors considered relevant by our Board of Directors. The dividends may be paid out of profits of Company in the year in which the dividend is declared or out of the undistributed profits or reserves of previous Fiscal years or out of both. The dividends declared by Company during the last five fiscals are set forth below (Rs. in million except share data) Fiscal Fiscal Fiscal Fiscal Fiscal 2008 2009 2010 2011 2012 Equity Share Capital 55.60 68.53 68.53 73.41 73.41 Face value of the Equity Shares (in Rs.) 10.00 10.00 10.00 10.00 10.00 Amount of Dividend Nil Nil Nil 2.94 2.94 Dividend Tax Nil Nil Nil 0.49 0.49 Rate of Dividend (%) Nil Nil Nil 4.00% 4.00% Particulars Our opinion Bharti Infratel has proposed to provide 30% - 50% of the profit as dividend whereas V-Mart does not have any clear dividend policy. Bharti has declared 25% dividend, (which includes 15% interim upto 31st March 12 and 10% interim of the current year) whereas V-Mart has provided a dividend @ 4% which is less as compared to Bharti. A higher dividend rate attracts the interest of the investors. MFM (2011 – 2014) – BUSINESS LAW PAGE 47 OF 82
  49. 49. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 10. Financial Details SEBI Requirements 6.42.10.1 Stand-alone and consolidated financial statements of the issuer company in respect of the last completed accounting year: (indicating changes in accounting policies, if any) a) profit or loss and assets and liabilities. b) limited review of the profit or loss and assets and liabilities as at a date not earlier than six months prior to the date of the opening of the issue. 6.42.10.2 For the period between the last date of the balance sheet and profit and loss account sent to the shareholders and up to the end of the last but one month preceding the date of the letter of offer following shall be furnished. a) b) c) Working results of the issuer company under following heads: Sales / turnover , Other income, Estimated gross profit / loss, Provision for depreciation, Provision for taxes., Estimated net profit /loss. Material changes and commitments, if any affecting financial position of the issuer company. Week-end prices for the last four weeks of equity shares. 6.42.10.3 Stock market quotation of shares/ convertible instruments of the company (high/ low price in each of the last three years and monthly high/low price during the last six months). 6.42.10.4 Accounting and other ratios: Earnings per share, Return on Net worth: Net Asset Value per share , on the basis of Indian Accounting Standards. 6.42.10.5 A Capitalisation Statement showing total debt, net worth, and the debt/equity ratios before and after the issue is made shall be incorporated. One standard financial unit shall be used in the Letter of Offer 6.42.11 A statement to the effect that the price has been arrived at in consultation between the issuer company and the Merchant banker. MFM (2011 – 2014) – BUSINESS LAW PAGE 48 OF 82
  50. 50. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT 6.42.14.1 Any material development after the date of the latest balance sheet and its impact on performance and prospects of the issuer company. Bharti Infratel Limited a) Total Assets of the Firm Figure 7: Total Assets of the Firm In the year 2008 – 2009 there was an increase in the Fixed Assets because the company had invested its capital in Tangible assets for further expansion of business i.e. Rs 122,638 million was in the year 2007 – 2008 increased to Rs. 150,789 in the year 2008 – 2009 since then no huge investment was done in fixed assets. In the year 2007 – 2008 the Current Assets were more because of the current investments in mutual funds i.e. Rs.38,017 which fell to Rs. 27,412 million in the year 2008 – 2009 due to the adverse market fluctuations. However, the sales of the company had increased considerable from the year 2007- 2008 from Rs. 7057.4 to Rs. 44,091.4 million in the year 2008-2009 which has resulted in increase in the figures for Trade Receivables from 859.1 in the year 2007 – 2008 to Rs 1,715.9 million in the year 2008 – 2009. The increase in debtors indicated the company had extended its credit period for 3 years and again made a good recovery from their debtors in the current year. In the year 2008-2009 there was an increase in the short term loan and advances since the company had given loans to its subsidiaries. MFM (2011 – 2014) – BUSINESS LAW PAGE 49 OF 82
  51. 51. MET LEAGUE OF COLLEGES b) A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Total Liabilities of the Firm Figure 8: Total Liabilities of the Firm In the year 2007 – 2008 the Noncurrent liabilities were more because of the Long Term Borrowings which was Rs. 38,705 million. They were paid off over subsequent years and so the figures were reduced to Rs. 10,729.50 in the current year. In the year 2008 – 2009 the other current liabilities were more amounting to Rs. 49,582 million however in the subsequent years the companies have meet its liabilities. c) Net Worth of the Firm Figure 9: Net Worth of the Firm MFM (2011 – 2014) – BUSINESS LAW PAGE 50 OF 82
  52. 52. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT The trend of Net worth indicates the company is growing and has a sound position to meet its financial obligation. Company has made fresh issue of equity shares in the current year. d) Reserves and surplus Figure 10: Reserves and surplus The Total of Reserves and Surplus has an increasing trend over the years except in the year 2008 – 2009 it was Rs. 99,184.8 million because the company had issued bonus shares e) Income statement of the firm Figure 11: Income statement of the firm MFM (2011 – 2014) – BUSINESS LAW PAGE 51 OF 82
  53. 53. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT In the year 2008 – 2009 the Revenue had increased around 6 times i.e. Rs 44,091.4 million than Rs 7,057.4 in the year 2007 – 2008. In the subsequent years the change in Income is proportionate with the change in Expenses. f) Cash Flow Statement Figure 12: Cash Flow Statement In the year 2008 – 2009 the cash generated from operating activity is Rs 470.7 million because the company has given short term loans & advances. For the subsequent years the cash generated from operating activities is proportionate with the level of activity of the company. The figures of Cash flow from Investing Activities of the company are negative because the company had purchased tangible, intangible assets and purchased current investments. The company had taken long term loan in the year 2008 – 2009 which was repaid over a period of time along with interest and therefore the Net cash generated from financing activities as on current year stands to Rs. -5064.2 MFM (2011 – 2014) – BUSINESS LAW PAGE 52 OF 82
  54. 54. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT V-Mart Retail Limited a) Total Assets of the Firm Figure 13: Total Assets of the Firm The fixed asset has increased over the year indicating that the company is investing in expansion of business. It has purchased tangible assets and also taken Long term loans and advances to meet its expansion plans. Company is efficiently & effectively using FA to generate its revenue. Current assets are to cover its short term obligations assets. Increasing trend indicates that the company is meeting of its debts over the years. b) Total Liabilities of the Firm Figure 14: Total Liabilities of the Firm MFM (2011 – 2014) – BUSINESS LAW PAGE 53 OF 82
  55. 55. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Company's short term debts are increasing over years on the other hand its CA are also increasing to pay off the short term debts. Net working capital i.e CA - CL is not negative which indicates that co can pay off short term debts to its creditors within 12 months. Noncurrent Liabilities are long term Loan which the company has paid off in subsequent years. We see that the long term debts has gone up in the year 2008 - 2009 and this can be mainly due to the recession but over the years it has been reduced. c) Net Worth of the Firm Figure 15: Net Worth of the Firm It is an amount by which the assets exceeds liabilities. We see that over the years the net worth of the company is increasing. Consistent increase in the net worth indicates that the company is in good financial health. It also indicates that the shareholder equity is in the good state over the years. d) Reserves and surplus Figure 16: Reserves and surplus MFM (2011 – 2014) – BUSINESS LAW PAGE 54 OF 82
  56. 56. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Reserves and surplus indicates saving from company's net profit. We can see co has maintained net profits during the year of recession. It showed an increasing trend from 10-11 and again for Mar 12 the profit is same. For the period from Mar - Nov the reserves and surplus has significantly gone up and company is in the good positions to pay out dividends to its shareholders in the coming years. e) Income statement of the firm Figure 17: Income statement of the firm There is a proportionate increase in expenses over a period of years. The revenue from operations have an increasing trend but in the current year the revenue has reduced to Rs. 2500.59 millions. MFM (2011 – 2014) – BUSINESS LAW PAGE 55 OF 82
  57. 57. MET LEAGUE OF COLLEGES f) A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Cash Flow Statement Figure 18: Cash Flow Statement The Net cash from Investing activities figures is in negative because the company has purchased fixed assets including intangible assets. The Net cash from Financing activities is negative in the year 2009-2010 i.e. Rs. -41.08 million because the company had borrowed a long term borrowing amounting to Rs. 33.97 million in the year 2008 – 2009 and paid off in the year 2009 – 2010 along with interest. MFM (2011 – 2014) – BUSINESS LAW PAGE 56 OF 82
  58. 58. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Disclosure 11. Litigations SEBI Requirements - - Litigations against the issuer company or against any other company whose outcome could have a materially adverse effect of the position of the issuer company. all the litigations against the directors involving violation of statutory regulations or alleging criminal offence shall be furnished in the prospectus. Outstanding litigations involving the promoter and group companies 1] All pending litigations in which the promoters are involved, defaults to the financial institutions/ banks, non-payment of statutory dues and dues towards instrument holders like debenture holders, fixed deposits, and arrears on cumulative preference shares by the promoters and the companies/ firms promoted by the promoters, shall be listed in the prospectus together with the amounts involved and the present status of such litigations/ defaults. The likely adverse effect of these litigations/ defaults, etc. on the financial performance of the issuer company shall also be mentioned. 2] Further, the cases of pending litigations, defaults, etc. in respect of companies/ firms/ ventures with which the promoters were associated in the past but are no longer associated shall also be disclosed in case their name(s) continues to be associated with particular litigation(s). Bharti Infratel Limited The details of the outstanding litigation or proceedings involving the Company, Subsidiary, Promoter, Directors and Group Companies are described in this section. The Company, on a consolidated basis, is one of the largest providers of tower and related infrastructure with operations across India. Due to the nature and extent of operations of the Company, the Company and Subsidiary are involved in a large number of cases with respect to its towers which are situated all over India. The Promoter is a global telecommunications company which currently has operations across India and in more than 20 countries which also includes 17 countries in Africa which were acquired from Zain Telecom in 2010. Due to its nature of operations, the Promoter is regulated by various regulatory authorities who have the authority to impose penalties for various levels of default. MFM (2011 – 2014) – BUSINESS LAW PAGE 57 OF 82
  59. 59. MET LEAGUE OF COLLEGES I. A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Litigation against Bharti Infratel 1. Criminal Cases There have been 68 criminal cases filed against the Company including cases in relation to its employees before different forums on grounds of inter alia nuisance, air and noise pollution and other health hazards caused due to operation of towers, electricity theft through illegal connection, non-payment of dues for filling diesel on the Company’s sites, dispute over ownership of land where towers are commissioned, removal of towers and diesel generator sets, objection to installation of towers in residential areas, unauthorised and illegal construction of towers, installation of towers in breach of the notifications issued by the Ministry of Civil Aviation and failure to obtain permission from relevant authorities for installation of towers. These matters are pending. 2. Civil Cases  Regulatory Proceedings  Tax Related Cases  Property Related Cases  Environment Related Cases  Labour Related Cases  Consumer Related Cases  Stamp Duty Related Cases  Arbitration Related Cases  Other Civil Cases 3. Notices      Tax Related Notices Regulatory Notices Other Notices Past Penalties Others II. Public Interest Litigation and Writ Petitions involving Bharti Infratel 1. Public Interest Litigation 2. Writ Petitions In addition to the cases disclosed above, there are 69 writ petitions involving the Company filed before various High Courts and the Supreme Court in relation to inter alia air and noise pollution caused by the operation of our towers, threat to human life and loss of memory and injury to body due to operation of our towers, installation of tower without requisite permission, MFM (2011 – 2014) – BUSINESS LAW PAGE 58 OF 82
  60. 60. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT disputes in relation to the property where our towers are installed, damage to property on which our towers are installed, nuisance caused in the residential area where our towers are installed, imposition of tax for obtaining a noobjection certificate for the installation of towers, imposition of stamp duty, disconnection of electricity, removal of tower, state imposition of tax on entry of goods into local area, challenging the state legislation for imposition of the entry tax, imposition of professional tax for each site and charging of fee for sharing of towers and renewal. These matters are pending. Litigation by Bharti Infratel 1. Criminal Cases There are four criminal cases filed by the Company before various forums in relation to inter alia dishonour of cheque, recovery of dues and fraud. These matters are pending. 2. Civil Cases  Tax Related Cases  Arbitration Related Cases  Other Civil Cases In addition to those indicated above, there are nine other civil cases filed by the Company in relation to inter alia shutting down of power supply, hindrance in functioning of towers and nuisance caused by the landlord impeding peaceful possession of the property. These matters are pending. Apart from the litigation cases described above, the company also involved in following cases:  Litigation involving BIVL  Litigation involving Directors  Litigation involving Bharti Airtel  Litigation involving the Group Companies  Litigation involving the Group Companies incorporated in India Table 8: Litigation against Bharti Infratel Entity Involved in the litigation Company Litigation by our Company Litigation Against our Civil Cases Criminal Cases Notices Tax Cases 15 4 _ 9 398 68 11 69 MFM (2011 – 2014) – BUSINESS LAW PAGE 59 OF 82
  61. 61. MET LEAGUE OF COLLEGES Entity Involved in the litigation Company Total Number of Cases Promoter and/or Directors Litigation by Promoters and/or Directors Litigation against Promoters and/or Directors Total Number of Cases Our Group Entity Litigations by our Group Entity Litigations against our Group Entity Total number of cases A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT Civil Cases Criminal Cases Notices Tax Cases 413 72 11 78 1 (Rakesh B. Mittal) 1 1 _ 2 (1. Akhil Kumar Gupta 2. Sarvjit Singh Dhillon) 3 2 1 1 3 2 1 43 _ _ _ 174 1 _ _ 217 1 _ _ MFM (2011 – 2014) – BUSINESS LAW PAGE 60 OF 82
  62. 62. MET LEAGUE OF COLLEGES A REPORT ON CRITICAL DISCLOSURES IN OFFER DOCUMENT V-Mart Retail Limited Except as stated in table below, there are no outstanding litigations, suits, criminal or civil prosecutions, proceedings or tax liabilities against Company, Directors, Promoters and Group Entity and there are no defaults, nonpayment of statutory dues, over-dues to banks/financial institutions/small scale undertaking(s), defaults in dues payable to holders of any debenture, bonds and fixed deposits and arrears of preference shares issued by Company, defaults in creation of full security as per terms of issue/ other liabilities, proceedings initiated for economic/ civil/ any other offences (including past cases where penalties may or may not have been awarded and irrespective of whether they are specified under paragraph (I) of Part 1 of Schedule XIII of the Companies Act) other than unclaimed liabilities of Company and no disciplinary action has been taken by SEBI or any stock exchanges against Company, our Directors, our Promoters or our Group Entity that would result in a material adverse effect on our business taken as a whole. Further, (i) neither Company nor Promoters, relatives of Promoters, members of Promoter Group, Group Entity and directors, have been declared as willful defaulters by the RBI or any other governmental authority, and, (ii) except as disclosed in this section, there are no violations of securities law committed by them or penalties imposed on them there under in the past or pending against them, and adverse finding regarding compliance with securities law. A brief summary of litigations and potential litigations in which Company is involved is under: Table 9: Litigation for V-Mart Retail Limited Entity Involved in the litigation Company Litigation by our Company Litigation Against our Company Total Number of Cases Promoter and/or Directors Litigation by Civil Cases Criminal Cases Tax Cases Financial Implications (Rs.in mil) Potential Litigation Financial Implications (Rs. in mil) 1 - 7 7.37 2 10.17 3 9 5 31.27 6 0.67 4 9 12 38.64 8 10.84 - - 1 0.03 - - MFM (2011 – 2014) – BUSINESS LAW PAGE 61 OF 82

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