Presentation by Alpha Partners presented during first Seminar on listing of mid-cap companies in USA held by January 24, 2013 at IHC, Delhi.

1. LISTING IN USA
INDIAN PERSPECTIVE, STRUCTURING
AND LEGAL REQUIREMENTS
By
Alpha Partners
Indian Habitat Centre
January 24, 2013

2.  SOURCE OF FUNDING
 PRIVATE EQUITY Vs. LISTING
 BANKS Vs. LISTING
 EASY EXIT ROUTE

3. 1. Access to New and Incredibly deep capital.
2. Increased Liquidity and broad investor base.
3. Brand building and wide media coverage.
4. Currency for acquisitions.
5. Benefits to employees.
6. New growth opportunities.
7. Surreal spike in valuation.
(Historically firms listed in the U.S. have a Tobin’s q ratio
higher than the firms from the same country that do not list in
the U.S.)
8. Lowered cost of capital.
9. Additional Visibility, Exposure and Prestige.
10. Negligible Red tape, Corruption and Administrative and
Legal hassle.
11. Enhanced protection to Investors.

4. The Flip Side
1. Stricter Disclosure and Compliance
Requirements.
2. Loss of privacy.
3. US $ Fluctuation Factor.
4. Risk exposure.
5. Costs

5.  ENTRY NORMS
1. The minimum post-issue paid-up capital to be Rs. 10 crore for
IPOs and the minimum issue size shall be Rs. 10 crore;
2. The minimum market capitalization shall be Rs. 25 crore;
3. Distributed profits in terms of section 205 of the Companies
Act, 1956, for at least three out of the immediately preceding five
years;
4. In-principle approval from recognised stock exchanges.
5. The above eligibility criteria would be in addition to the
conditions prescribed under the following:
a. SEBI (Issue of Capital & Disclosure Requirements)
Regulations, 2009;
b. Securities Contracts (Regulations) Act 1956;
c. Securities Contracts (Regulation) Rules 1957;
d. Securities and Exchange Board of India Act 1992;
e. Companies Act 1956;
f. and any other circular, clarifications, guidelines issued by the
appropriate authority.

6.  COMPANIES ACT, 1956
 FOREIGN EXCHANGE MANAGEMENT ACT
 FOREIGN DIRECT INVESTMENT POLICY
 OVERSEAS DIRECT INVESTMENT POLICY
 FCCB
 SEBI ACT AND REGULATIONS
 INCOME TAX ACT, 1961
 LISTING AGREEMENTS

7.  HOLDING COMPANY STRUCTURE
 FUND STRUCTURE
 AMERICAN DEPOSITORY RECEIPTS

8. Listing on NYSE
US
Z US Co.
Holding
Company Tax Haven
India
Promoter(s) A India Pvt. Ltd.

9. Listing on NYSE
US
Issuer Company Tax Haven for US
Holding Asset
Company Manager Tax Haven (MU, SG)
India
Advisory
company
Asset/ Asset/ Asset/
Asset/ entity entity entity
entity

10. Frequently Asked Questions
• Q. Can Promoter(s) hold more than 55% of the US Co.?
Ans: Yes.
• Q. What is the minimum public holding requirement?
Ans: There is no minimum public holding requirement.
• Q. Are there any requirements regarding % of return/dividend to
be paid to the investors?
Ans: No.
• Q. In case the promoters wish to acquire 100% shareholding of the
US Co. at a future date, what factors are to be kept in mind?
Ans: As with any acquisition, this must be negotiated with the
shareholders of the company. There are certain filings that have to
be made with the Securities and Exchange Commission and
Promoters must also comply with state law.

11. Work Required
• Full Business Plan in English;
• Historical and pro forma financials in U.S.
dollars;
• Corporate History, i.e. minutes, resolutions;
• Shareholder list;
• PCAOB audit from a reputable auditing firm.
• Corporate restructuring on the India side.

12. Due Diligence Checklist
1. Business Plans and Projections
2. Organization and Capitalization of the Company
3. Financial Information
4. Loan Documents
5. Officers, Directors and Employees
6. Business Products and Services
7. Public Relations/Advertising
8. Property
9. Securities
10. Litigation
11. Corporate History
12.Patents and Trademarks
13. Bankruptcy Proceedings
14.Other Agreements, Sales records etc.

13. Who can issue
 Company registered under the Companies
Act, 1956
 Companies restrained from access to capital
markets by SEBI not permitted
 Unlisted companies not permitted unless they go
for prior or simultaneous listing subjc to approval
of SEBI specifying the % offered in ADR issue
 Erstwhile OCB’s not permitted

14. Pre-requisites
 Prior permission from the Department of
Economic Affairs, Ministry of
Finance, Government of India
 Compliance with extant FDI policy and FEMA
Schedule I provisions
 Consistent track record of minimum 3 years
 Aggregate foreign investment made either
directly or indirectly not to exceed 51% of the
issued and subscribed capital of the issuing
company (except FII investment). There is no
monetary limit up to which an Indian company
can raise ADRs / GDRs.

15. Deployment of funds and use of funds
 The proceeds so raised have to be kept abroad till actually
required in India;
 Pending repatriation or utilization of the proceeds, the Indian
company can invest the funds in:-

 Deposits, Certificate of Deposits or other instruments offered by banks
rated by Standard and Poor, Fitch, IBCA ,Moody's, etc. with rating not
below the rating stipulated by Reserve Bank from time to time for the
purpose;
 Deposits with branch/es of Indian Authorized Dealers outside India; and
 Treasury bills and other monetary instruments with a maturity or
unexpired maturity of one year or less.
 There are no end-use restrictions except for a total ban on
deployment / investment of such funds in real estate or the stock
market.
 The ADR / GDR proceeds can be utilized for first stage
acquisition of shares in the disinvestment process of Public Sector
Undertakings / Enterprises and also in the mandatory second
stage offer to the public in view of their strategic importance.

16. Pricing of issue
 ADR to be denominated in freely convertible currency and
underlying shares to be denominated in INR;
 In case of listed companies:
 Average of the weekly high and low of the closing prices of the
related shares quoted on the stock exchanges during the six
months preceding the relevant date;
 Average of the weekly high and low of the closing prices of the
related shares quoted on the stock exchange during the two weeks
preceding the relevant date.
Relevant date= 30 day prior to date of meeting passing
resolution under section 81(1A) of the Companies Act, 1956.
 The above is not applicable to companies going for
simultaneous listing.
 In case of unlisted companies: As per RBI pricing norms in
force. Presently, valuation has to be conducted as per
discounted cash flow method.

17. Transfer, redemption and lock-in
 There is no lock-in. Once listed, the ADR’s are
freely tradeable;
 The holder of ADR may ask for redemption and
underlying shares shall be issued to the holder
who can sell them subject to FEMA/FDI policy
Intermediaries involved
 Lead manager to the issue
 Domestic custodian bank
 Overseas depository bank [Approved
intermediary under the scheme would be an
investment banker registered with SEC, USA]
 Underwriters
 Legal advisors

18.  India proposing to allow unlisted companies to
raise funds abroad.
 Around 19 Indian companies have listed
ADR’s so far. Only Makemytrip has used the
holding company structure to list in the US.

19.  HANDLING CORPROATE HOUSEKEEPING
 DUE DILIGENCE SERVICES
 HANDLING INDIAN REGULATORY
COMPLIANCES, ADVISORY AND
STRUCTURING
 TAX STRUCTURING

20. LOOKING FORWARD….
ALPHA PARTNERS
E-156, Sector 20
NOIDA
info@alpha-partners.org
www.alpha-partners.org
+91 120 4562203