restructuring options spin off split up

1. INVESTMENT BANKING
PROF. RAJIV CHANDRA
MBA (IIMA), ICWA, CS
SEMESTER 3
CLASS OF 2023

2. LEARNING OUTCOMES
• VARIOUS MODES FOR CORPORATE RESTRUCTURING AS A SPLIT
UP STRATEGY INCLUDING BUSINESS ACTIVITIES IN SUBSIDIARIES
AND ASSOCIATE COMPANIES
• ROLE AND METHODS FOR ASSET BASED SPLIT-UPS –
DEMERGERS, HIVE-OFF, RECONSTRUCTION, SLUMP SALE AND
ASSET DISPOSITION
• TYPES OF DEMERGERS INCL STRUCTURED DEMERGER,
COMPARATIVE ANALYSIS OF DEMERGER VS HIVE-OFF
• METHODS FOR SPLIT-UPS UNDER THE EQUITY APPROACH –
SPIN-OFFS, EQUITY CARVE OUT AND DIVESTITURE
• SUBSIDIARISATION AND DE-SUBSIDIARISATION
• STATUTORY FRAMEWORK FOR ASSET BASED SPLIT-UPS AND
EQUITY BASED SPLIT-UPS
• VALUATION APPROACHES IN CORPORATE RESTRUCTURING
• INVESTMENT BANKING PERSPECTIVES IN RESTRUCTURING
• CASE STUDIES

3. OVERVIEW
• CORPORATE RE-ORGANISATIONS – WIDE TERM –
ENCOMPASSES CHANGES TO A PARTICULAR COMPANY
OR TO MORE THAN ONE CO. IN A SINGLE TRANSACTION
• IN RESPONSE TO BUSINESS ENVIRONMENT, CHANGING
BUSINESS DYNAMICS – TO ENHANCE SHAREHOLDERS
VALUE
• 2 TYPES OF RE-ORGANISATIONS
i. SPLIT-UP OF AN EXISTING CO THRU ASSET SALE,
SUBSIDIARISATION OR OTHER METHODS INVOLVING
ASSET/EQUITY SALE – CALLED RESTRUCTURING
ii. INTEGRATION OF 2 OR MORE COMPANIES – CALLED M&A
iii. CHANGE IN THE SHAREHOLDING PATTERN OF A CO.
RESULTING IN CHANGE IN CONTROL OR OWNERSHIP –
CALLED ACQUISITION/TAKEOVER

4. RATIONALE FOR RE-ORGANISATIONS
• BUSINESS ENVIRONMENT
• DYNAMICS OF BUSINESS
• SUCCESSION PLANNING / FAMILY SPLITS
• EXAMPLES IN INDIAN CONTEXT
1. TO CREATE LONG-TERM HOLDING STRUCTURES
– TATA GROUP CONDUCTED A GROUP RESTRUCTURING IN
1990s TO BUILD COHESIVENESS IN GROUP STRUCTURE
AND CORPORATE OBJECTIVES.
– FUTURE GROUP IN 2013 RESTRUCTURED THRU A SCHEME
OF ARRANGEMENT.
– ADITYA BIRLA GROUP – INVESTMENTS AND CROSS-
HOLDINGS FROM INDO GULF TO HINDALCO. CLEAR LINES
OF DEMARCATION ACCORDING TO BUSINESSES, LIKE
MANUFACTURING, CELLULAR, INSURANCE

5. RATIONALE FOR RE-ORGANISATIONS
2. TO HAVE BETTER BUSINESS FOCUS AND VALUATIONS FOR
INDIVIDUAL BUSINESSES – IN DIVERSIFIED COMPANIES HAVING
MANY DIVISIONS CARRYING ON SEPARATE BUSINESSES, BY
CREATING SEPARATE SUBSIDIARIES FOR EACH BUSINESS,
CREATES VALUE FOR EACH BUSINESS, BETTER FOCUS ON
RUNNING EACH BUSINESS, FUND RAISING, LISTING AND EASES
DILUTION IN THOSE BUSINESSES
– WIPRO LTD DEMERGED ITS 3 NON-IT BUSINESS DIVISIONS IN 2012
INTO WIPRO ENTERPRISES LTD.
– STATEMENT BY EXEC. CHAIRMAN – “I AM CONFIDENT THAT THE
DEMERGER WILL ENHANCE VALUE FOR OUR SHAREHOLDERS AND
PROVIDE FRESH MOMENTUM FOR GROWTH. EACH OF OUR
DISTINCT BUSINESSES IS BEST OF BREED IN ITS RESPECTIVE
INDUSTRY AND WE ARE COMMITTED TO BOTH THE BUSINESSES.”
– SEVERAL OTHER DEMERGERS OF A DIVERSIFIED COMPANY INTO A
CONGLOMERATE GROUP THRU RESTRUCTURING FALLS IN THIS
CATEGORY.
– BAJAJ AUTO LTD. 2008 AND ADANI ENTERPRISES LTD 2015

6. RATIONALE FOR RE-ORGANISATIONS
3. TO ATTAIN OR BETTER UTILISE TAX-SHIELDS
AND TAX WRITE-OFFs:
– TAX LAWS ALLOW FUTURE PROFITS TO BE SET OFF
AGAINST ACCUMULATED LOSSES AND
UNABSORBED DEPRECIATION, PROVIDED BUSINESS
IS CARRIED ON. HIVING OFF SUCH BUSINESSES AND
MERGING WITH PROFITABLE COMPANIES CAN
ACCELERATE THE WRITE-OFFs
REVERSE MERGER DONE TO AVOID PERMISSIONS
FROM IT AUTHORITIES AND RENAMING THE COMPANY
TO THE MERGED COMPANY

7. RATIONALE FOR RE-ORGANISATIONS
4. TO RESTRUCTURE BALANCE SHEETS
– WITH A VIEW TO REFLECT THE ASSET AND LIABILITY
PROFILE BETTER OR TO INCREASE THE ASSET BASE
BETTER
– LAND VALUATION, INVESTMENT IN SHARES OF
SUBSIDIARY – HISTORICAL COST MAY BE SEVERELY
LOWER THAN MARKET PRICE. ACCOUNTING CONCEPTS
DO NOT ALLOW TO VALUE SUCH ASSETS AT MARKET
PRICE. HOWEVER, WITH THE MERGER AND ADOPTING
THE ASSETS/LIABILITIES AT MARKET PRICES, BETTER
REFLECTION IS POSSIBLE
– INSTEAD OF WRITING-OFF OF DEFERRED REVENUE
EXPENDITURE AGAINST P&L OR GENERAL RESERVES, IN
MERGER ITS POSSIBLE TO WRITE IT OFF AGAINST CAPITAL
RESERVES (SHARE PREMIUM)

8. RATIONALE FOR RE-ORGANISATIONS
5. TO FACILITATE DISTRIBUTION OF ASSETS AND
FAMILY SETTLEMENTS
– SPLITTING IS NECESSITATED DUE TO FAMILY SPLITS OR
SETTLEMENTS. SUCCESSION/PLANNING IN A FAMILY
OWNED GROUP
– RELIANCE, BAJAJ, THAPAR, DCM, MODIS, APOLLO TYRES
6. TO EXIT NON-CORE BUSINESS
– SELLING OFF A BUSINESS TO JV PARTNER DUE TO
INCREASED COMPETITION / VOLATILITY IN INDUSTRY
– BETTER FOCUS ON CORE BUSINESS
– TOMCO BY TATA TO HUL
– TIMES BANK BY BENETT COLEMAN
– TATA STEEL’S CEMENT BUSINESS

9. RATIONALE FOR RE-ORGANISATIONS
7. STRATEGIC DIVESTURES AND EXITING LOSS MAKING
BUSINESSES
– MANY INSTANCES WHERE A COMPANY IS NURTURED WITH A
STRATEGIC SALE IN MIND
– VENTURE CAPITAL BACKED COMPANIES
– SALE OF CUSTOMER ASSET TO ICICI
– SPECTRAMIND TO WIPRO
– INDIA WORLD TO SATYAM
– FLEXTRONICS WAS BOUGHT BY VCs FOR SUBSEQUENT
STRATEGIC SALE
– AMERICAN REMEDIES TO DR. REDDY’S LABORATORIES
– NUTRINE CONFECTIONERY TO GODREJ FOODS
– BFL SOFTWARE TO MPHASIS. MPHASIS TO EDS
– RANBAXY TO DAIICHI
– SESA GOA TO VEDANTA
– KELVINATOR TO WHIRLPOOL INDIA

10. RATIONALE FOR RE-ORGANISATIONS
8. TO FACILITATE THE ENTRY OR EXIT OF BUSINESS
PARTNERS
– TO ACCOMMODATE JV PARTNER, BUSINESS MAY BE HIVED
OFF INTO A SEPARATE COMPANY TO FACILITATE INVESTMENT
BY JV PARTNER
9. TO CAPTURE FORWARD AND BACKWARD LINKAGES IN
THE VALUE CHAIN
– RPG GROUP RESTRUCTURED ITS TYRE AND RUBBER BUSINESS
IN 2002. RUBBER BUSINESS WAS CONSOLIDATED UNDER CEAT
LTD., WHICH MERGED THE RUBBER DIVISION OF GROUP CO.
HARRISON MALYALAM WITH ITSELF. OBJECTIVE WAS TO
STRENGTHEN THE BUSINESS OF CEAT BY BACKWARD
INTEGRATION FOR SOURCING RUBBER AND THUS PROVIDING
SYNERGIES.
– HARRISON MALYALAM MERGED WITH ITS ANOTHER
SUBSIDIARY AND CONCENTRATED ON ITS CORE BUSINESS -
TEA

11. RATIONALE FOR RE-ORGANISATIONS
10.BY OPERATION OF LAW OR ORDER OF A
JUDICIAL/QUASI-JUDICIAL AUTHORITY
– WHEN COMPANIES BECOME TOO LARGE, ANTI TRUST
REGULATORS MAY BREAK THESE INTO SMALLER
MANAGEABLE COMPANIES TO AVOID MONOPOLIES
– MRTPC / CCI – COMPETITION COMMISSION OF INDIA
HAS SIMILAR POWERS
– BIFR – PREVENTION OF SICK INDUSTRIES COMPANIES
ACT HAD POWERS TO ALLOW MERGER WITH
PROFITABLE COMPANIES AND PROVIDING TAX
BENEFITS AND OTHER RELIEFS
– NOW INSOLVENCY AND BANKRUPTCY CODE 2016
HAS SIMILAR POWERS

12. TYPES OF CORPORATE RESTRUCTURING
• INTERNAL RESTRUCTURING
– NO CHANGE IN CORPORATE STRUCTURE / CONTROL
– FINANCIAL RESTRUCTURING
– DEBT – DEBT SWAP, BAIL-OUTs, CONVERTING TO
EQUITY, CHANGING TERMS, ETC
– EQUITY – CAPITAL REDUCTION, CONVERTING
PREFERENCE TO EQUITY
– OPERATIONAL RESTRUCTURING – BPR
– SBUs CREATION – DIVISIONALISATION
– BASICALLY, ALL THESE ARE MANAGEMENT DRIVEN
CHANGES. OPERATIONAL RESTRUCTURING AND
DIVISIONALISATION ARE OUTSIDE THE SCOPE OF
INVESTMENT BANKING

13. FINANCIAL RESTRUCTURING
• INVOLVES EITHER EQUITY OR DEBT
RESTRUTURING
• TO INCREASE CAPITAL EFFICIENCY, TO REDUCE
LEVERAGE AND FINANCIAL COSTS, TO RATIOALISE
EQUITY BASE – OVER/UNDER CAPITALISATION
• INVOLVING CAPITAL REDUCTION AND NOT
INVOLVING CAPITAL REDUCTION
• ELABORATE PROCESS PRESCRIBED FOR CAPITAL
REDUCTION AS AFFECTS INTERESTS OF
SHAREHOLDERS

14. SPLIT-UP THRU TRANSFER OF ASSETS
• WHEN EVER NEW BUSINESS IS STARTED BY A COMPANY, IT IS POSSIBLE
TO DO SO BY HAVING
– A NEW DIVISION WITHIN THE MAIN COMPANY
– A WHOLLY-OWNED SUBSIDIARY OR A JV WITH A 3RD PARTY
• IT IS EASIER TO KEEP IT AS A PART OF MAIN CO
– EASE IN FUNDING
– TAX WRITE-OFF
– NO TRANSFER PRICING ISSUES
• HOWEVER, SUBSEQUENTLY WHEN BUSINESS TAKES OFF, IT MAY
BECOME NECESSARY TO HIVE IT OFF
• THUS, MAIN OBJECTIVE OF A SPLIT-UP THRU TRANSFER OF ASSETS AND
LIABILITIES IS THE BREAK-UP OF THE B/S INTO 2 OR MORE B/Ss
• 2 UNDERLYING OBJECTIVES
– ON A GOING CONCERN BASIS
– ON A BREAK-UP OR LIQUIDATION BASIS – DIVESTURE / SALE OF A BLOCK OF
ASSETS
• IMPORTANT TO UNDERSTAND THE PURPOSE AND PLAN ACCORDINGLY
FROM THE BEGINNING

15. DEMERGER OF A COMPANY
• A DEMERGER IS A METHOD OF SPLIT-UP OF THE B/S OF A
DIVERSIFIED CO. IN THE CONTEXT OF ALLOWING THE
DIFFERENT BUSINESSES TO CONTINUE TO EXIST AFTER
THE SPLIT-UP ON A GOING CONCERN BASIS
• THE BALANCE SHEET WOULD BE SPLIT-UP AND THE SUM
TOTAL OF INDIVIDUAL B/Ss WOULD ADD UPTO THE
ERSTWHILE B/S.
• EACH SHAREHOLDER IN THE ERSTWHILE COMPANY,
WOULD GET SHARES IN THE NEW COMPANIES IN THE
RATIO OF THEIR HOLDING
• PARENT CO THAT SHRINKS IN SIZE IS CALLED THE
DEMERGED COMPANY
• DEMERGER IS AN ANTI-THESIS TO A MERGER

16. DEFINITION OF DEMERGER
BOTH UNDER THE COMPANIES ACT AND THE IT ACT. U/S 2(19AA) OF IT ACT,
A DEMERGER SHOULD CONFORM TO ALL THE FOLLOWING CONDITIONS:
• THE DEMERGER SHOULD BE A SCHEME OF ARRANGEMENT UNDER
SECTION 391-394 OF THE COMPANIES ACT, 1956 (SECTION 230-232 OF
THE COMPANIES ACT, 2013). THESE SECTIONS PRESCRIBE THE PROCESS
BY WHICH SUCH SCHEMES ARE SANCTIONED BY NCLT – SPL
RESOLUTION
• ALL ASSETS AND LIABILITIES BEING TRANSFERRED BY THE DEMERGED
COMPANY BECOME THE ASSETS/LIAB OF THE RESULTING CO BY VIRTUE
OF DEMERGER
• ASSETS AND LIAB ARE TRANSFERRED AT BOOK VALUES
• RESULTING COMPANY(IES) ISSUE SHARES TO THE SHAREHOLDERS OF
THE DEMERGED COMPANY IN THE SAME RATIO
• ATLEAST, 75% OF THE SHAREHOLDERS OF THE ERSTWHILE COMPANY
BECOME SHAREHOLDERS IN THE RESULTING CO.
• THE TRANSFER OF THE UNDERTAKING IS ON A GOING CONCERN BASIS
• IT IS IMPORTANT TO NOTE THAT IF ALL THESE CONDITIONS ARE MET, IT
IS CONSIDERED TAX NEUTRAL.
• IF CONDITIONS ARE NOT MET, THE SCHEME OF ARRANGEMENT IS STILL
VALID BUT MAY NOT GET TAX BENEFITS

17. EXAMPLE OF DEMERGER
• FOLLOWING IS THE B/S OF BRAKE LINERS LTD.,
WHICH HAS 2 DIVISIONS:
– BRAKE DIVISION, AND
– BRAKE LINER DIVISION
• BRAKE DIVISION IS PROPOSED TO BE DEMERGED
INTO A SEPARATE COMPANT CALLED BRAKE UP
LTD.
• BRAKEUP LTD PROPOSES TO ISSUE 1400 EQ
SHARES OF RS 10 EACH TO THE SHAREHOLDERS
OF BRAKE LINERS LTD

18. ERSTWHILE COMPANY B/S

19. SPECIFIC ASSETS/LIABILITIES
SPECIFICASSETSANDLIABILITIESOFBRAKEDIVISION
LIABILITIES RS. LAC ASSETS RS. LAC
NFA 14800
INVESTMENTS 1200
CURRENTASSETS 8600
CURRENTLIABILITIES 2800 MISCEXPENDITURE 0
2800 24600

20. METHODOLOGY
• SPECIFIC ASSETS ARE TRANSFERRED AT BOOK
VALUES
• COMMON LIABILITIES ARE ALLOCATED IN THE
RATIO OF ASSETS IF NOT SPECIFIED OTHERWISE.
LENDERS MAY NOT AGREE TO SPLIT OF
BORROWINGS
• 9500 * 14800/20500 = 6859
• RESERVES ARE NEITHER ALLOCATED NOR
TRANSFERRED
• DIFFERENCE IN ASSETS AND LIABILITIES IS
CREDITED TO CAPITAL RESERVE OR GOODWILL

21. NEW COMPANY B/S
BASED ON THE COMPUTATION

22. DEMERGED B/S
B/S OF BRAKE LINERS LTD AFTER DEMERGER
LIABILITIES RS. LAC ASSETS RS. LAC
SH. CAPITAL NFA 5700
EQ SHARES OF RS. 10 EACH 10000
INVESTMENTS 3800
RESERVES & SURPLUS
CAPITAL RESERVE CURRENT ASSETS 6400
SHARE PREMIUM
GENERAL RESERVE MISC EXPENDITURE 1500
P&L A/C BALANCE 1559
LONG TERM BORROWING 2641
CURRENT LIABILITIES 3200
17400 17400

23. DEMERGED B/S
• SHARE CAPITAL OF DEMERGED COMPANY IS NOT REDUCED
UNLESS SPECIFICALLY PROVIDED FOR IN THE SCHEME OF
ARRANGEMENT AND APPROVED BY NCLT
• BALANCING FIGURE IS THE NEW RESERVES NUMBER.
NORMALLY, CAPITAL RESERVES ARE ADJUSTED FIRST AS THEY
ARE RESTRICTIVE IN USE. SCHEME CAN PRESCRIBE
ACCOUNTING TREATMENT
• IF ADDITIONAL RESERVE IS GENERATED, IT IS TREATED AS
CAPITAL RESERVE.
• SUCH DEMERGERS ARE CALLED PLAIN VANILLA DEMERGERS
• SHARE CAPITAL OF NEW COMPANY IS NOT IMPORTANT, AS
SHAREHOLDERS GET PROPORTIONATE HOLDING
• 25% HOLDING CAN BE KEPT BY OLD COMPANY IN NEW
COMPANY AS ONLY 75% LIMIT IS SPECIFIED BY IT ACT.
• STRUCTURED DEMERGER BY L&T OF ITS CEMENT DIVISION TO
ULTRATECH CEMENTS

24. STRUCTURED DEMERGER
• SUPPOSING IN THE PREVIOUS EXAMPLE, BRAKE
LINERS LTD WAS TO GET 50% OF NEW SHARES
AND ONLY 50% WOULD GO TO THE
SHAREHOLDERS:
B/S OF BRAKE LINERS LTD AFTER DEMERGER
LIABILITIES RS. LAC ASSETS RS. LAC
SH. CAPITAL NFA 5700
EQ SHARES OF RS. 10 EACH 10000
INVESTMENTS 3800
RESERVES & SURPLUS INVESTMENT IN BRAKEUP LTD 7000
CAPITAL RESERVE CURRENT ASSETS 6400
SHARE PREMIUM
GENERAL RESERVE 6659 MISC EXPENDITURE 1500
P&L A/C BALANCE 1900
LONG TERM BORROWING 2641
CURRENT LIABILITIES 3200
24400 24400

25. OTHER BUSINESS HIVE OFFs
• A HIVE-OFF IS POSSIBLE WITHOUT COMPLYING
FULLY WITH THE CONDITIONS OF A DEMERGER
STIPULATED UNDER IT ACT
• THIS WOULD AMOUNT TO A HIVE-OFF NOT
AMOUNTING TO MERGER
• DEPENDS UPON STRATEGIC INTENT, WHICH MAY
BE MORE IMPORTANT THAN TAX-NEUTRALITY
• DEMERGER FOLLOWED BY CHANGES IN
SHAREHOLDING

26. TCS HIVE OFF BY TATA SONS
• WHEN TATA SONS, THE OWNERS OF TCS DIVISION, WANTED TO
SUBSIDIARISE THE DIVISION, IT ACQUIRED ALONG WITH ITS GROUP
SHAREHOLDERS, THE ENTIRE SHAREHOLDING OF AN EXISTING
COMPANY, CALLED RR DONNELLEY (I) P LTD AND CHANGED ITS NAME TO
TATA CONSULTANCY SERVICES LTD AND MADE IT A SUBSIDIARY WHEREIN
TATA SONS HELD 90% AND REST BY PROMOTER GROUP.
• THEN TATA SONS FILED A SCHEME OF HIVE OFF UNDER SECTIONS 391-
394 FOR THE TRANSFER OF TCS DIVISION TO TCS LTD WITH THE HIGH
COURT OF JUDICATURE AT BOMBAY IN 2002.
• CONSIDERATION WAS TO BE SETTLED IN CASH
• IN ORDER TO RAISE CASH, TCS LTD WAS TAKEN PUBLIC.
• IN ORDER TO ENSURE PAYMENT TO TATA SONS, IT WAS PROVIDED THAT
THE SCHEME WOULD NOT BE EFFECTIVE UNTIL THE UNDERWRITING
AGREEMENTS FOR THE IPO WERE EXECUTED.
• PRIOR TO SUBSIDIARISATION, TATA SONS CONSOLIDARED ALL ITS IT
SERVICES INTO THE TCS DIVISION, TO REALISE MAXIMUM VALUE FOR
THE SUBSIDIARY. TATA SONS ENTIRE HOLDING OF 51.12% IN CMC LTD
WAS ALSO TRANSFERRED. TOTAL CONSIDERATION WAS RS 3799
MILLION. TCS DIVISION MADE A LOAN OF RS 3750 MILLION TO TCS LTD,
WHICH WAS EXTINGUISHED ON HIVE-OFF.

27. CASE STUDY – MARICO LTD
• MARICO LTD SUBSIDIARISED ITS SKIN CARE DIVISION THAT
OPERATED UNDER THE KAYA BRAND NAME INTO ITS WHOLY
OWNED SUBSIDIARY MARICO KAYA ENTERPRISES LTD. IN A
SCHEME OF ARRANGEMENT ON A GOING CONCERN BASIS.
• WAS DONE WITH A STRATEGIC OBJECTIVE OF PROVIDING
BETTER FOCUS, VALUE UNLOCKING AND EXTRACTION AND
FUND RAISING
• WAS STRUCTURED AS A TAX COMPLIANT VERTICAL DEMERGER
AND MARICO KAYA ISSUED SHARES TO MARICO
SHAREHOLDERS. THE SHAREHOLDING STRUCTURE MIRRORED
THAT OF NARICO. IN THE PROCESS, MARICO KAYA WAS LISTED
WITHOUT AN IPO BY VIRTUE OF THE SCHEME OF
ARRANGEMENT, UNDER THE PROVISIONS OF SEBI
REGULATIONS FOR BACKDOOR LISTING.
• THUS THROUGH THIS ROUTE, MARICO ACHIEVED TAX
NEUTRALITY, MINIMUM SHAREHOLDING NORMS FOR LISTING.
• MARKET REACTED VERY POSITIVELY TO THE PROPOSAL TO
DEMERGE

28. SLUMP SALE / ASSET SALE
• SLUMP SALE IS SELLING OR TRANSFER OF ONE OR MORE
UNDERTAKINGS AS A RESULT OF THE SALE FOR A LUMPSUM
CONSIDERATION, WITHOUT VALUES BEING ASSIGNED TO THE
INDIVIDUAL ASSETS AND LIABILITIES.
• CAN INCLUDE NON TANGIBLE ASSETS ALSO LIKE PATENTS,
BRAND AND LICENCES, ETC
• FACILITATES EASIER NEGOTIATION, EASIER DETERMINATION OF
TAX AND ACCOUNTING ISSUES
• PURCHASE CONSIDERATION RECEIVED WOULD BE RECKONED AS
SALE VALUE AND THE NET ASSET VALUE OF THE UNDERTAKING
TRANSFERRED AS THE COST OF ACQUISITION FOR
DETERMINATION OF CAPITAL GAINS
• SLUMP SALE CAN BE ACCOMPLISHED THRU A RESOLUTION U/S
180(1)(a) OF THE COMPANIES ACT. ITS NOT A QUASI-JUDICIAL
PROCESS
• THRU BUSINESS TRANSFER AGREEMENT
• SLUMP SALE TO 100% SUBSIDIARY IS TAX-NEUTRAL

29. PIRAMAL’S SLUMP SALE TO ABBOT

30. ASSET SALE
• DISPOSAL OF REDUNDANT OR SURPLUS ASSETS –
AMOUNT TO ASET SALE
• MAY NOT BE FOR STRATEGIC REASONS BUT
ORDINARY/ROUTINE NATURE
• COULD BE PART OF DISTRESS SALE TO REPAY
DEBTS, REDUCE INTERESTS
• SURPLUS LAND SALE, SHIFTING OF FACTORIES
OUTSIDE CITY LIMITS- DCM
• OFFICE PROPERTIES SALE BY BRITANNIA, GODREJ,
MONETIZATION OF LAND PARCELS THROUGH
DEVELOPMENT

31. SPLIT-UP THROUGH TRANSFER OF EQUITY
• PROCESS OF SPLIT-UP THROUGH TRANSFER/DILUTION OF EQUITY ROUTE
DOES NOT ENJOY ANY SPECIAL PRIVILEGES UNDER THE IT ACT.
• NOR DOES IT REQUIRE ANY SPECIAL TREATMENT UNDER COMPANIERS ACT,
AS TRANSFER OF SHARES BETWEEN DIFFERENT SHAREHOLDERS IS A
MATTER OF MUTUAL CONSENT/CONTRACT BETWEEN TWO PARTIES.
• IT DOES NOT REQUIRE SHAREHOLDERS APPROVAL OR A CONFIRMATION BY
NCLT
• LENDERS MAY HAVE CONDITIONS REGARDING NON SALE OF
CONTROLLING STAKE
• IF THE SUBSIDIARY IS LISTED, THE TRANSACTION COULD BECOME
SUBSTANTIAL ACQUISITION FOR THE BUYER UNDER THE TAKEOVER CODE
AND HE MAY UNDER SEBI RULES, REQUIRED TO MAKE OFFER TO OTHER
SHAREHOLDERS TO PURCHASE THEIR SHARES
• BUYER WOULD ALSO NEED SHAREHOLDERS APPROVAL U/S 186 OF THE
COMPANIES ACT IF SUCH INVESTMENT IS IN EXCESS OF 60% OF THE PAID-
UP-CAPITAL AND FREE RESERVES OR 100% OF FREE RESERVES, WHICHEVER
IS HIGHER
• NORMAL STAMP DUTY ON TRANSFER OF SHARES HAS TO BE PAID
• FEMA GUIDELINES IF NON-RESIDENT BUYER
• NORMAL CAPITAL GAINS TAX IS PAYABLE

32. INVESTENT BANKING PERSPECTIVES
• RETAINED AS ADVISORS BY COMPANIES THAT WISH TO
RESTRUCTURE, TO HAND HOLD THE ENTIRE PROCESS OF
CONCEPTUALISING AND EXECUTION FROM A FINANCIAL
PERSPECTIVE
• COLLECTIVE EFFORT OF SEVERAL OTHER PROFESSIONALS
LIKE ACCOUNTANTS, LAWYERS, COMPANY SECRETARY,
MANAGEMENT AND HR EXPERTS
• COMPLEX RESTRUCTURING TRANSACTIONS REQUIRE
EXPERT ADVICE AND ASSESSMENT OF ISSUES INVOLVED
FROM STRATEGIC, FINANCIAL, TRANSACTION, TAX,
STATUTORY AND ACCOUNTING.
• HE MUST GIVE SHAPE TO THE PROPOSAL AS A
TRANSACTION THAT MEETS ALL REQUIREMENTS AND
THEN PLAYS A DISTINCT ROLE IN EXECUTION ALONG WITH
OTHERS

33. STRATEGIC OBJECTIVES
• BETTER CAPTURE OF VALUE FOR AN EXISTING LINE OF OPERATION
• STRATEGIC EXIT FROM A LINE OF BUSINESS
• DISPOSAL OF SURPLUS ASSETS TO PROVIDE LIQUIDITY
• INDUCTION OF A STRATEGIC PARTNER FOR A DIVISION
• UNLOCK VALUE OF AN INVESTMENT MADE IN ANOTHER CO.
• LIST ONE DIVISION, WHILE KEEPING THE REST OF THE CO.
UNLISTED
• INVITE PRIVATE EQUITY INTO A PARTICULAR BUSINESS AND NOT
THE COMPANY AS A WHOLE
• CONVERSION OF AN EXISTING DIVISION INTO JV
• HIVE-OFF AN ACTIVITY THAT HAS DISTINCT RISK PROFILE
• INCREASE LEVERAGE THRU NON-RECOURSE FINANCING (RING
FENCING) FOR A PARTICULAR LINE OF BUSINESS THAT IS RISKY
• FAMILY SETTLEMENTS

34. CONTRACTUAL AND STATUTORY REQUIREMENTS
• COMPETITION COMMISSION OF INDIA – ANTI TRUST /
MONOPOLISTIC COMPANIES
• SPECIAL LICENSING REQUIREMENTS – LIKE HOUSING FINANCE,
BROKING, INVESTMENT BANKING, UNDERWRITING, ETC CAN
NOT BE DONE IN A BANKING LICENCE
• PROVISIONS OF COMPANIES ACT RELATING TO ARRANGEMENT
AND RECONSTRUCTION U/S 230-234 AND 319
• APPROVAL FROM MEMBERS U/S 180(1)(a) OF THE COS. ACT
• TAKEOVER CODE – SEBI REGULATIONS
• CAPITAL REDUCTION
• FDI POLICY AND PROPOSED FOREIGN INVESTMENT
• LISTING GUIDELINES AND SCRA REQUIREMENTS
• DISSOLUTION AND WINDING UP OF COMPANIES
• CONTRACTUAL RIGHTS – HIVE-OFF (TERMS OF CONTRACT)

35. GROUP ASSIGNMENT - 1
• TOPICS
1. RECENT CASE OF M&A – BANK OF BARODA
RATIONALE-WHAT ARE THE SYNERGIES
CHALLENGES IN MERGER
ACCOUNTING METHOD
TAX IMPACT
TIME TAKEN FROM ANNOUNCEMENT TO FINALISATION
2. RECENT CASE OF ACQUISITION – AIR INDIA BY TATA GROUP, BIG BASKET, 1mg
RATIONALE-WHAT ARE THE SYNERGIES/REASONS
STRATEGIC REASONS
TAEOVER CODE 2011 - %AGE HOLDINGS TRIGGERING OPEN OFFER
PRICING – HOW VALUED
CHALLENGES
IMPACT ON MARKET PRICE POST ACQN.
ROLE OF IB
3. RESTRUCTURING – RELIANCE INDUSTRIES – JIO, RETAIL, RENEWABLE ENERGY, ETC
RATIONALE
DIFFERENT OPTIONS AVAILABLE – SPLIT UP , SPIN OFF, DEMERGER, EQUITY DILUTION
4. FINANCIAL SCAMS/BUBBLES/CRISIS – US CRISIS OF 2008 / NIRAV MODI PNB FRAUD
5. FINANCIAL VALUATIONS – DIFFERENT METHODS OF VALUATION
6. VALUATIONS OF START-UPS - METHODS
7. INTERNATIONAL FUND RAISING – CURRENT SCENARIO FOR EQUITY & DEBT, INSTRUMENTS,
INTERMEDIARIES

36. GROUP ASSIGNMENT
• PRESENTATION TO BE MADE BY THE GROUP
ON 08/09/2022
• MARKS – 100
• WEIGHTAGE 20

37. GROUP ASSIGNMENT - 2
• FOR THE SHARE PRICE DATA COLLECTED:
1. FIND CORELATION BETWEEN PRICE OF EACH STOCK
AND SENSEX
2. PICK ONE COMPANY AND PLOT KEY FINANCIALS &
RATIOS FOR THE LAST 3 YEARS
3. PREDICT PRICES OF STOCK OF EACH COMPANY FOR
2018-19 MONTHLY BASIS AND COMPARE WITH
ACTUALS TILL AUG, 2018 USING TIME-SERIES.
E-MAIL EXCEL FILE TO RCHANDRA1959@GMAIL.COM
DUE BY 18/9/2018
MARKS – 3

38. LIVE PROJECT
• PICK A CASE OF MERGER AND ANALYSE THE
– FACTORS/REASONS FOR MERGER
– FINANCIALS/VALUATION METHOD
– STRATEGIC REASONS FOR MERGER
– ACCOUNTING METHOD DEPLOYED
– TAX IMPACT
– TIME TAKEN
– INVESTMENT BANKERS INVOLVED
DUE DATE 23/9/2018
PRESENTATIONS ON 26/9/2018
MARKS - 15

39. CONCLUSION
THANK YOU