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Unlocking value though demergers and slump sales
1. U n lo c k in g V a lu e t h r o u g h D e m e r g e r
a n d S lu m p S a le 5 August 2011
2. D e me rg e r - C onc e pt
Ho r iz o n t a l
De me r g e r
S h a r e h o ld e r S h a r e h o ld e
Issue of
s of rs of
shares as
Tr a ns fe r o r Tr a ns fe r o r
considerati
C o C o
on
Demerge Tra ns fe r o Tra ns fe r e
Tr a n s fe r o r C o
r of r C o e C o
B u s in e B u s i n eBusiness s f e r e
Tra n B u s in e B u s in e
ss A ss B B e C o ss A ss B
August 2011 Page 2
3. D e me rg e r - C onc e pt
St r uc t ur ed
De me r g e r
S h a r e h o ld e r S h a r e h o ld e r s
s of o f Tra ns fe r o r
Issue of Tr a n s fe r o r
shares as C o
C o
considera
tion
Tr a ns fe r o r
Tr a n s fe r o r C o
C o
B u s in e B u s in e B u s in e
ss A ss B ss A
Demerg
er of
Busines Tr a ns fe r e
Tr a ns fe r e e C o s B e C o
B u s in e
ss B
August 2011 Page 3
4. D e me rg e r - C onc e pt
P ros C ons
â–ºBusiness â–ºLimited
segregation into leveraging
independent capacity
entities â–ºMultiple listed
â–ºROCE, RONW entities
separately â–ºInability to
captured reflect fair
â–ºFocused value of assets
management
â–ºMarket /
regulator
perception
August 2011 Page 4
5. S lu m p S a le - C o n c e p t
S l u mp S a l e t o S l u mp S a l e t o
t h ir d p a r t y s u b s id ia r y
S h a r e h o ld e r s S h a r e h o ld e S h a r e h o ld e r s
o f S e lle r r s o f B u ye r o f S e lle r In v e s t o r
C ompa ny C ompa ny C ompa ny
P o s s ib ilit y
o f fu n d
r a is in g
C o n s id e r a t
io n B u ye r
S e lle r S e lle r
C ompa n
C ompa ny C ompa ny
y
B u s in e s B u s in e s B u s in e B u s in e
s A s B S lu m p ss A ss B
S a le o f
B u s in e s s S lu m p
B S a le o f
B u s in e s s
B u ye r
B
C ompa n
y
August 2011 Page 5
6. S lu m p S a le - C o n c e p t
P ros C ons
â–ºAbility to â–ºShareholders
recognise fair perception
value of assets â–ºIncome Tax
â–ºFund raising â–ºProspective Vs
opportunity retrospective
â–ºAccelerated tax â–ºNo automatic
shelter listing
â–ºCapital
structuring
August 2011 Page 6
7. W h y D e m e r g e r / S lu m p S a le ?
1. Focus on core competencies
2. Facilitate fund raising
3. De-risking the business model
4. Separation of loss making business
5. Monetisation of non core business
6. Exceptions to the Rule
August 2011 Page 7
8. F o c u s o n c o r e c o m p e t e n c ie s – B a ja j A u t o
L td
P re D e me rg e r s truc tu re
Promote
Public
r Group
28.9 67.7%
%*
B a ja j
A u to
Publ
ic
Alli All All
10 ian
49 24 anz ian
0%
% Maharas
% z z
Bajaj 50
Bajaj 50 74 26
htra % % Bajaj %
Auto 74 26 Allian%
Allianz
Scooter % z
Holdings %
Allianz Genera
Balancs financ
Bajaj Life l
e 27% ial
Insurance Insura
held by Distri
Publ Company
butor
nce Co
Bajaj Publ
Promot
ic
er
38
50 6% 95 ic
% 9% 4%
Group % PT%Bajaj 57
5% Bajaj Bajaj%
Auto ICICI
Auto Hindu
Indonesi Bank
Finance sthan
a Balance
34% held by
Bajaj
Promoter
*3.35% held by
Group Maharashtra Scooters
August 2011 Page 8 Ltd
9. F o c u s o n c o r e c o m p e t e n c ie s – B a ja j A u t o
L td
R e s u lt a n t s t r u c t u r e
Promote
Public
r Group
28.91 68
%* B a ja j H o ld in g s & %
In v e s t m e n t L t d
( E a r lie r B a ja j A u t o
48 21 30 L td ) 30 21 48
% % % % % %
B a ja j A u t o L t d
( E a r lie r B a ja j
B a ja j F in s e r v L t d
H o ld in g s a n d
In v e s t m e n t L t d )
â–º 2 -w h e e le r a n d 3 -
â–º W in d p o w e r b u s in e s s
w h e e le r b u s in e s s
â–º In v e s t m e n t in B a ja j A u t o
â–º In v e s t m e n t in P T B a ja j F in a n c e L t d
â–º In v e s t m e n t in In s u r a n c e
A u t o In d o n e s ia
â–ºC a s h B u s in e s s
â–ºC a s h
*3.35% held by
Maharashtra Scooters
August 2011 Page 9 Ltd
10. F o c u s o n c o r e c o m p e t e n c ie s – B a ja j A u t o
L td
P r e a n d p o s t d e m e r g e r v a lu e
Market capitalisation analysis (All figures in `Crores)
Company On Last trading day of combined entity Post demerger As on date
March 2008 May 2008 Aug 2011
Bajaj Holdings and Investment Ltd (Earlier 21,403 6,122* 8,463
Bajaj Auto Ltd)
Bajaj Auto Ltd - 13,673** 41,078
(Earlier Bajaj Holdings and Investment Ltd)
Bajaj Finserv Ltd - 10,128** 7,396
*BSE market cap as on Record Date
**BSE market cap on listing
August 2011 Page 10
11. F a c ilit a t e f u n d r a is in g – S . K u m a r
N a t io n w id e L t d
S lu m p S a le o f lu x u r y t e x t ile s d iv is io n
G IC
S in g a p o r e
Outside
India ndia
I
P ro mo te
P u b lic
rs
44.21% 55.79%
S K N Reid
L & Subsequent
Other Taylo infusion of
Busine r ` 900 crs
ss Divisio for 25.4%
Consider n Transfe stake
ation of
r of
` 350 crs
luxury
paid textiles
100%
R e id & division
on
T a y lo r slump
( In d ia ) sale
L im it e d basis
25.4%
August 2011 Page 11
12. F a c ilit a t e f u n d r a is in g – S . K u m a r
N a t io n w id e L t d
P r e a n d p o s t s lu m p s a le v a lu e
Market capitalisation analysis* (All figures in `crores)
Company Before announcement 6 months post
announcement
27 Nov 2007 28 May 2008
SKNL Market Cap 2,982 2,459
Reid & Taylor (I) Ltd At the time of investment by GIC Singapore – valued at
~ ` 3,540 crs
*Source: Company website,
BSE listings, news articles
August 2011 Page 12
13. D e -r is k in g t h e b u s in e s s m o d e l – S u n
P h a r m a c e u t ic a l
D e m e r g e r o f R e s e a r c h & D e v e lo p m e n t
d iv is io n
Promot
Public
ers
68.31% 31.69%
S u n P h a r m a c e u t ic a l
Issue I n d u s t r i e s R&D Division
L td
Innovative
of APIs, Research &
shares Generics development
Business Division
(Including
NCCDs)
Demer
ger of
R&D
S un P ha rma
Divisio
n
Ad va nc e d R e s e a rc h
C o m p a n y L im it e d
(S PARC )
August 2011 Page 13
14. D e -r is k in g t h e b u s in e s s m o d e l – S u n
P h a r m a c e u t ic a l
P r e a n d p o s t d e m e r g e r v a lu e
Market capitalisation analysis* (All figures in `crores)
Company First Last trading day of Post Demerger (On As on
announcement combined entity listing of SPARC) date
3 Feb 2006 30 April 2006 18 July 2007 4 Aug 2011
Sun Pharmaceutical 14,267 19,108 19,654 53,430
Industries Ltd
SPARC - - 1,718 1,840
*Source: BSE
listings
August 2011 Page 14
15. S e p a r a t io n o f lo s s m a k in g b u s in e s s –
A le m b ic L t d
D e m e r g e r o f c o r e p h a r m a c e u t ic a l
b u s in e s s
P ro mo te r
P u b lic
G roup
63. 36.
5% 5%
A le m b ic L t d
P ha rma c e u ti
La nd a nd
c a l b u s in e s s Key was
Power
(E xc e pt P e nG
A s s e ts a nd s e p a r a t io n o f
D iv is io n ) : la n d b a n k a n d
P e nG
A P Is & lo s s m a k in g
D iv is io n
F o r m u la t io n s P e n G d iv is io n
Demer fr o m c o re
ger 10
pha rma
b u s in e s s
0%
29.
45% 2% A le m b ic 25.
8%
P ha rma L td
August 2011 Page 15
16. S e p a r a t io n o f lo s s m a k in g b u s in e s s –
A le m b ic L t d
In d ic a t iv e v a lu e o f s e p a r a t e b u s in e s s e s
A le m b ic L t d A le m b ic L t d - S e p a r a t e b u s in e s s d iv is io n s *
( C o m b in e d ) *
F Y 10 ` O t h e r B u s in e s s e s C ore P ha rma
c rore s B u s in e s s
Net Sales 1,138 F Y 10 ` F Y 10 `
c rore c ro re s
EBITDA 116.8 Net 104 Net 1,034
s
Sales Sales
EBITDA 10% EBITDA -13.2 EBITDA 130
Margin
Depreciati 43 EBITDA - EBITDA 12.5%
on Margin Margin
EBIT(+oth 78 Deprecia 15 Deprecia 28
er income) tion* tion*
Interest 30 EBIT(+oth -28 EBIT(+oth 102
er er
EBT 48
income) income)
Interest 5 Interest 25
EBT 4%
margin % EBT -33 EBT 77
Tax 4
EBT - EBT 7.5%
PAT 40
*Depreciation split inmargin % of
margin % the ratio
35:65 in the ratio of split of assets
during demerger
# Interest split 15:85 in the ratio of
split of debt during demerger
Alembic Pharma Ltd has not been listed
on the stock market yet
*Source: Company financials,
research reports, news articles
August 2011 Page 16
17. M o n e t is a t io n o f n o n c o r e b u s in e s s –
Wo c k ha rd t L td
S lu m p s a le o f n o n c o r e b u s in e s s
P ro mo te r
P u b lic
G roup
73.6 26.3
4% 6%
Wo c kha rd t
L td V e t o q u in
N o n c o r e b u s in e s s e s ol S A,
A n im a l
N u t r it io n
H e a lt h Fra nc e
D iv is io n
D iv is io n S lu m p s a le o f n o n c o r e
a n im a l h e a lt h b u s in e s s t o
V e t o q u in o l, F r a n c e . M e d ia
S a le o f N u t r it io n D iv is io n r e p o r t s c la im e d s a le
a nnounc e d o n 3 Aug us t p r ic e t o b e ~ ` 17 5 –
2 0 11 t o D a n o n e 2 0 0 c rs
August 2011 Page 17
18. M o n e t is a t io n o f n o n c o r e b u s in e s s –
Wo c k ha rd t L td
S lu m p s a le o f n o n c o r e b u s in e s s
Market capitalisation analysis* (All figures in `crores)
Company First Post sale of Animal On announcement of sale
announcement Health Division of Nutrition Division
25 April 2009 2009 3 Aug 2011
Wockhardt Ltd 1,058 1,575 4,831
*Source: BSE
listings
August 2011 Page 18
19. E x c e p t io n s t o t h e R u le – P ir a m a l
H e a lt h c a r e L t d
S lu m p S a le o f d o m e s t ic f o r m u la t io n s
b u s in e s s
Payment of `
16,740 crs
as
A b b o tt
P ro mo te r consideratio a b o r a t o r i e s
L
G roup
P u b lic n
49.24% 50.76%
P ir a m a l
H e a l t h c aDomest
re L td Transfer of
OTC, ic Domestic
CRAMS Formul Formulations
ations Business on
Slump sale
basis
August 2011 Page 19
20. E x c e p t io n s t o t h e R u le – P ir a m a l
H e a lt h c a r e L t d
P r e a n d p o s t s lu m p s a le v a lu e (All figures in `crores)
Market capitalisation analysis*
Seller On announcement of On slump sale As on date
slump sale
21 May 2010 25 June 2010 04 Aug 2011
Piramal Healthcare Ltd 10,500 10,319 7,915
Counterintuitive movement - Erosion of overall value
of Piramal Healthcare Ltd
Remaining business operated at lower margins
*Source: Company website,
BSE listings, research
August 2011 Page 20 reports
21. E x c e p t io n s t o t h e R u le – G w a lio r
C h e m ic a l In d u s t r ie s L t d
S lu m p s a le o f m a in c h e m ic a l b u s in e s s
In 2009, Gwalior Chemical Industries Ltd (Now GeeCee Ventures Ltd) sold its main
Chemical Business to Lanxess India Pvt Ltd for ` 380 crs through a slump sale
M a r k e t C a p o n d a t e o f s lu m p s a le
a nno unc e me nt: ` 2 6 5 c rs
S lu m p s a le c o n s id e r a t io n : ` 3 8 0 c r s
Market capitalisation analysis* (All figures in `crores)
*Source:
BSE
August 2011 Page 21 listings
22. E x c e p t io n s t o t h e R u le – In d o A s ia n
F u s e g e a r L td
S lu m p s a le o f s w it c h g e a r b u s in e s s
In 2010, Indo Asian Fusegear Ltd sold its Switchgear Business to Legrand for
` 600 crs through a slump sale
Market capitalisation analysis* (All figures in `crores)
*Source:
BSE
August 2011 Page 22 listings