merger airtel rejig: value creation or compulsion?

May 2021 150/-

Airtel Rejig: Value

Creation or

Compulsion?

MERGERHT Media Limited:

Consolidating Businesses

MERGERSolara Becomes Bigger

LEGALCAPITAL REDUCTION: A tool to give back

surplus assets to shareholders or for

financial reengineering!

M&AA Comprehensive Insight

into Mergers and Acquisitions

A One of a Kind Online Portal for all your restructuring needs.

The site will soon launch the models apart from various other online models available

as of now to enable professionals and businessman to make a better decision of choosing

and executing a restructuring for their clients and companies.

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For your off line support please turn to the

last page for our parent company which

takes a company restructuring from idea

to integrations. Contact Details too on the

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HT Media Limited has undergone quite a few restructuring exercises in the past. To

consolidate all its business under one roof which not only simplifies the structure, reduces

the compliance, and help in availing tax benefits, the group has decided to merge their 3 listed

subsidiaries viz., Digicontent Limited, Nextmedia Works Limited and HT Mobile Solutions Ltd

into HT Media Ltd. Prior to this merger, HT Mobile Solutions has also filed a scheme to merge

its subsidiaries into itself.

Indian Pharma entities has potential to grow multifold in next few years with changing global

dynamics. In this scenario we can see wave of consolidation in Pharma industry going ahead.

Promoters of Solara Active Pharma Science Limited announced merger with Aurore Group

company which will not only increase their geographical reach but also add complementary

products in their portfolio. Solara's current business was due to demerger transaction

undertaken by Strides Shasun & Sequent Scientific back in 2018 which will now expand

further.

Capital reduction is being used by a lot of companies as a part of internal restructuring and

mostly for adjusting of losses against share capital. It can also be used to distribute the

excess capital amongst all its shareholders or selectively as well. In this article we examine all

the different scenarios and the implications of Companies Act 2013 and Income Tax act on

the same.

Second wave of COVID-19 pandemic is here. No of

cases and more so fatalities make us feel that April

2020 was a trailer. Corporate results for Q4 of FY21

for all industries are normal or above normal. Let us

hope that this 2nd wave and upcoming 3rd wave

does not create any substantial disruptions. Both

government and Reserve Bank of India are taking

proactive steps to support businesses more so

MSMEs. The protection given by the Government to

the Organizations against the commencement of

Insolvency Proceedings is also now over. Since this is

the global pandemic, not only to “Compete” with the

competitors but to “Sustain” and maintain the

“Profitability” in this tough situation, business should

think of innovative strategies including corporate

restructuring.

Telecom Industry in India has been seeing a great

consolidation in the past years and was accelerated

with entry of Reliance JIO. The industry is now reaching a matured stage where 2-3 major

players shall remain. Our cover article is on journey of Bharti Airtel and its most current

internal restructuring exercise to segregate its different business undertakings in different

entities to make each business ready for strategic partnership and fund Rasing. All TELCO

need massive funds including for payment for 5G and considering present Mital's present

stake in the company does not allow them to dilute at the listed company level. This exercise

seems to be more for survival against brutal competitors like Reliance Jio and Vodafone.

Editor: Dr. Haresh Shah

Editorial Board

Mr. Upendra Shah

Mr. Vikram Trivedi

Mr. Nitin Gutka

Mr. Neeraj Marathe

Advisors

Mr. Aniruddha Jain

Mr. Padam Singh

Mr. Sanket Joshi

Research Team

First Floor, Matruchaya building,

Plot no 27, Mitramandal Colony, Pune 411 009.

Telefax : (020) 2442 5826

Email : [email protected]

Editorial & Marketing Office

Manilal Kher, Ambalal & Co.

MKA Chambers, Crossley House,

Britiesh Hotel Lane,

Off Bombay Samachar Marg,

Fort, Mumbai 400 001

Email : [email protected]

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Mrs. Jyoti Shah on behalf of

HU Mergersindia.com Pvt. Ltd.,

First Floor, Flat no 1, Matruchaya building,

Plot no 27, Mitramandal Colony,

Parvati, Pune - 411 009.

Telefax : 020 24420209

Printed & Published by

or any of it's

sister concerns are not legally or otherwise

liable for any consequences arising out of the view

expressed. HU Mergersindia.com Pvt. Ltd. assumes

no liability or responsibility for any inaccurate,

delayed or incomplete information, nor for any

actions taken in reliance thereon. The information

contained about each individual, event or

organization has been provided by such individual,

event organizers or organization without verification by

us.

Disclaimer

HU Mergersindia.com Pvt. Ltd.

Dr. Haresh Shah

Along with our regular features

Happy Reading….

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MERGER

COVER ARTICLE Airtel Rejig: Value

Creation or Compulsion?



20

Solara Becomes Bigger

12

17

09

05

28

LEGAL

04 Vol. XXX Issue No. 2 May 2021

CAPITAL REDUCTION: A tool to give back



M&A DIGEST



ME

RG

ER

Solara Becomes Bigger


Indian Pharmaceutical Industry is

witnessing sea changes. With China + 1

strategy, India Pharma Companies are at

inflection points. Amidst of this, Indian

Pharma companies are trying to expand

its wings to strengthening their

operations to make most of the current

scenario.

In similar move, Solara Active pharma

S c i e n c e L i m i t e d a n n o u n c e d

amalgamation of Aurore Life Sciences

Private Limited along with other two

companies.

Solara Active Pharma Sciences Limited

(“Solara”) is an API manufacturer. It has a

legacy of over three decades and trace its

origins to the API expertise of Strides

Shasun Ltd. and the technical know-how

of human API business from Sequent

Scientific Ltd. It has 140+ scientists

working at two R&D centres and 6 API

manufacturing facilities armed with global

approvals and 2 dedicated R&D facilities.

Solara has formed in 2018 under the

demerger scheme of the select API

business of Strides Shasun Limited

(Strides) and the human API business of

Sequent Scientific Limited (Sequent).

Aurore Life Science Private Limited (”

Aurore”) company incorporated on 26th

September 2016. Aurore Life Science is

engaged in the business of developing

wide range of generic pharmaceutical

products. It has one R&D centre and 2 API

manufacturing facilities. Aurore Life

Science Pvt Ltd holds 100% of share

capital of Empyrean Life Sciences Pvt Ltd

and also holds 67% stake in Aurore

Pharmaceuticals Private Limited which

also develops and manufactures vide

range of generic pharmaceutical

products.

Empyrean Lifesciences Private Limited

(“Empyrean”), a private limited company

and a wholly owned subsidiary of Aurore

Anirudha Jain

This merger addresses key priorityareas for Solara enabling its strategyof accelerating growth via an inorganicplay.

06

Li fe Sc ience is engaged in the

pharmaceutical business. Empyrean is

also engaged in the research and

development of pharmaceutical products.

Hydra Active Pharma Sciences Private

Limited (“Hydra”) is engaged in

pharmaceutical business through its

subsidiary company Aurore Life Science

Pvt Ltd where in it holds 61.65% stake.

Transaction Structure:

With an Appointed Date as 1st April 2021,

Aurore will get merged with Solara

followed by the merger of Empyrean &

Hydra into Solara.

1. As a result of merger of Aurore into

Solara, Solara will issue (including to

Hydra) 1,298 number of equity shares for

every 10,000 number of shares held in

Aurore.

2. No shares will be issued as Empyrean

will become wholly owned subsidiary of

Solara as result of Step 1.

Swap Ratio

Post-merger, Solara will hold 67% stake in

Aurore Pharmaceuticals Private Limited,

that is an existing subsidiary of Aurore

Life Science.

Karuna Business Solutions LLP is a

common promoter in Solara and Hydra

3. As a result of merger of Hydra into

Solara, Solara will issue 884 number of

equity shares for every 10,000 number of

shares held in Hydra.

Post-Merger, certain shareholders of

Aurore will be classified as a Promoters of

Solara and thus, the promoter holding in

Solara will increase.

The companies involved in the Scheme

have following relationship with each

other–

holding 7.83% and 27.40% stake in

respective companies.

Thus, Post-Merger, existing promoter's

stake in Solara will also increased along

with the promoters of Aurore getting

classified as a promoter. Currently, Mr.

Bharat Sesha is Managing Director & CEO

of Solara and Aurore is headed by

founder Rajender Rao Juvvadi as MD and

Amit Kaptin as COO. Rajender & Amit will

continue post-merger, however, their

roles in merged entity has not yet clarified

by Solara.

Hydra holds 61.65% stake in Aurore

Life Science

Vol. XXX Issue No. 2 May 2021

Table 1: Share Issuance by Solara

Equity Shares

Equity Value (₹ Crores)

Relative value per share

Category

4,92,24,567

6926

-

Solara (Post)

3,59,29,767

5055

1406

1,32,94,800

1870

1406

New Issue Pre-transaction

Aurore brings signif icant CRAMS

business to the combined entityentity.. .

Solara's CRAMS footprint will now triple in

sizesize, and this provides Solara with a

scale to grow at a much faster trajectory

than planned in the CRAMS vertical. In

short, this merger addresses key priority

areas for Solara and is fully in line with its

stated strategy of accelerating growth

via an inorganic play.

CRAMS Business

With an addition of two sites to existing six

sites of Solara, one out of two is FDA

approved from the Aurore family means

that Solara can now have multiple site-

based supply security for many of its key

products. The amalgamation wil l

significantly de-risk operations with the

c o m b i n e d e n t i t y h a v i n g e i g h t

manufacturing facilities, three Research &

Development Centres and footprint in 75

+ countries enabling a wider market reach

and customer offerings.

The amalgamation will enable the

consolidation of the API business of the

Transferor Companies wi th the

Transferee Company and would create

one of the largest API players in the

industry and will facilitate in focused

growth, operational efficiency, integration

synergies and better supervision of the

business. As per the management,

Aurore's product portfolio is completely

complementary to that of Solara and

thus, Aurore will bring additional products

to the Solara's basket.

Rationale for the Merger

Strengthening API Business

Efficient Use of Marketing

Resources & Capacity

Additional Sites

In last few years, Solara has made

significant investment to enhance the

capacity including the multipurpose plant

in Vizag while Aurore has expanded its

reach in multiple geographies. This will

enable combined company to use the

facilities and marketing capabilities

efficiently.


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April 2021 150/-

DEMERGER

INSOLVENCYPre-packaged Insolvency

Resolution Process

for MSME Corporate Debtors

Cipla demerges

two-business undertakings

ACQUISITIONPiramal gets RBI nod

to acquire DHFL

APL APOLLO:

MERGER OF VALUE

ADDED WITH

MAINSTREAM PRODUCTS

Table 3: Valuation metrics

Enterprise Value (₹ Crores)

EV/EBITDA

EV/Revenue

Particulars

6000

14.52

3.7

2140

12

3.9

AuroreSolara

Table 2: Financials of Solara and Aurore FY 19-20 (All figs in ₹ Crores)

Particulars AuroreSolara

Revenue

EBITDA

EBITDA %

PAT

PAT %

Circa Capital Employed

1616

413

25.5%

221

13.7%

2100

545

175

32.11%

95

17.43%

500

Financials & Valuation

The proposed merger will not only givemultiple benefits to both companies,but it can start the next wave ofconsolidation in pharma sector

Solara is well positioned to benefit immensely

by leveraging the individual strengths


operations of merged Solara which

may open new avenues for Solara.

Along with part of a bigger entity,

merger will offer a liquidity to the

existing promoters of Aurore as well

as will not trigger “Open Offer”

requirement under SEBI Takeover

Code. Going forward, merged entity

can leverage upon the strengths of

each of the standalone entities and

offer better value proposition. In

future, if required, promoters may

invite strategic partner at much

better valuation than standalone

valuation or even can raised funds for

expansion at a lower cost.

With changing global dynamics,

Indian Pharma entities has potential

to grow multifold in next few years. To

reap maximum benefits, companies

will look to consolidate the operations

which can give numerous benefits to

them. Solara-Aurore merger is a

classic example of this. The proposed

merger will not only give multiple

benefits to both companies, it can

l ikely to start next wave of

consolidation in pharma sector.

to 1616 in 2021.

Promoters having different expertise

will come together and manage the

Solara has formed inorganically

under the demerger scheme by

demerging the select API business of

Strides Shasun Limited and the

human API business of Sequent

Scientific Limited. The demerger

changed the fortune as revenue’s

increased from INR 562 crores in 2018

NATIONAL NEWS

M&A


RattanIndia toacquire 43% stakein Revolt forRs 150 crore

RattanIndia Group will get 50% of the board seats in

Revolt and Rajiv Rattan will take over as the non-

executive chairman of the company.

The electric vehicles (EV) maker meanwhile will get

much-needed capital to ramp up production and expand

sales to more geographies after disruptions in the past

year led to a delay in its plans and a long queue of waiting

customers. It presently sells the RV400 electric

motorcycle in six cities in India.

“We have a clear runway in the electric motorcycle space

and you can expect more products coming soon. We will

be dominating on the motorbike side,” Sharma told ET.

Listed company Rattan India Enterprises is investing

Rs 150 crore in electric motorcycle maker Revolt

Intellicorp, founded by Micromax co-founder Rahul

Sharma, for a 43% stake in the company.

Revolt is one of the few electric motorcycle makers in

India presently, including One Electric Motorcycles, as

majority of EV makers focus on scooters. Its revenue for

the past two financial years has been about Rs 41 crore,

as per stock exchange filing from RattanIndia Enterprise

Limited (REL).

“We were looking at various opportunities, which we will

continue to do. We have been looking at EV space with

huge interest and Rahul has a track record of creating

Micromax and giving tough competition to multinational

brands,” Rajiv Rattan told ET.

This is REL's first deal after moving away from the

infrastructure business with the intent of investing in

“new-age” companies. Earlier known as RattanIndia

Infrastructure, the company recently renamed itself and

will now be the holding company of the RattanIndia

Group's new investments.

As per management, Aurore has valued

at INR 1870 crores. After considering the

debt of around INR 270 crores, the

enterprise value assigned to Aurore

comes to around INR 2140.

Solara has been valued at around INR

5055 crore.


ME

RG

ER

HT Media Limited: Consolidating Businesses

HT Media Limited (HTML) is public listed

company. HTML publishes 'Hindustan

Times,' an English daily, and 'Mint,' a

business paper and undertakes

commercial printing jobs. HTML is also

engaged into the business of providing

entertainment, radio broadcast and all

other related activities through its Radio

Stations operating under brand name

'Fever 104', 'Fever' and 'Radio Nasha'. The

digital business of the HTML comprises of

various online platforms such as

'shine.com,' etc.

Digicontent Limited (DCL) is a public

listed company engaged in the business

of Entertainment & Digital Innovation

Business. DCL is also a fellow subsidiary of

HTML. The Hindustan Times Limited,

holding company of HTML owns 69.51%

stake in DCL.

Next Mediaworks Limited (NML) is a

public listed company engaged in the

business of FM broadcasting and

presently has the "Radio One" FM brand in

7 cities of the country being Delhi,

Mumbai, Chennai, Kolkata, Bengaluru,

Pune, and Ahmedabad. The company

operates under frequency 94.3MHz in all

its cities except for the city of Ahmedabad

where it operates under the frequency 95

MHz HTML owns ~51% equity stake in

NML.

HT Mobile Solutions Limited (HTMS) is

an unlisted public limited company

engaged in the business of investment

through HT Digital Media Holdings

Limited to carry out mobile marketing,

social media marketing, advertising,

mobile CRM and loyalty campaigns,

mobile music content, ring tones and

integrates with other media campaigns

Padam Singh

Scheme of demerger, filed in 2018,of FM Radio business because NRLWoS of NML failed to get approval fromMinistry of Information & Broadcasting.

10

Appointed date is 1st April 2020 (for

both the scheme)

Effectiveness and

effective date of scheme:

Effectiveness of merger of HTMS with

and strategies. “HTMS has filed a scheme

of amalgamation with the National

Company Law Tribunal, New Delhi Bench

for merger of Firefly e-Ventures Limited

('FVL'), HT Digital Media Holdings Limited

('HTDML'), HT Education Limited ('HTEL'),

HT Learning Centers Limited (HTLCL'),

India Education Services Private Limited

('IESPL'), Topmovies Entertainment

Limited ('TEL') with itself, which is pending

for final approval” (HTMS Scheme). Post

implementation of the HTMS Scheme,

HTML will hold ~99.41% equity interest in

HTMS.

HTML is depend on the effectiveness of

HTMS Scheme (Part D of Scheme).

Further also note that the effectiveness

of each part of the scheme are severable

and can be made effective independently.

The effective date is last date of filing of

orders of the NCLT (National Company

Law Tribunal) with Registrar of

Companies.

The Transaction

This the simple transaction of merger of

three companies with HTML. However, it

has two parts:

1. Merger of HTMS with HTML which is

depend on approval of merger of other

entities with HTMS.

2. Merger of DCL and NML with HTML.


INTERNATIONAL NEWSCROSS BORDER NEWS

M&A


"The said acquisition of the target company will help AGC to

AGC Networks on Friday said its subsidiary - Black Box

Holdings - will acquire a majority stake in Z Services HQ DMCC

for about $3.94 million (around Rs 28.6 crore). Black Box

Holdings Ltd, an indirect wholly-owned subsidiary of AGC

Networks has entered into a share sale agreement with Z

Services Holding Ltd, a BVI business company incorporated in

the British Virgin Islands on March 11, 2021, a regulatory filing

said.

Under the agreement, Black Box Holdings will acquire 76 per

cent of shares of Z Services HQ DMCC for a total consideration

of approximately $3.94 million, payable at the time of closing, it

added.

The acquisition - which will require approval from DMCC - is

anticipated to be completed within 60 days of signing the share

purchase agreement, it said.

Z Services HQ DMCC is a limited liability company incorporated

under the laws of Dubai Multi Commodities Centre (DMCC) and

is engaged in the business of providing services in relation to

cloud cybersecurity architecture that includes web, email, cloud

application, unified access management, cyber forensic,

security operation centre, incident response and risk

cybersecurity.

strengthen its presence in the Middle East region and also add

cloud cybersecurity capabilities to offer a wider range of

services to our customers. This will also give rise to an

opportunity to cross-sell to the current customers," the filing

said.

AGC Networks toacquire stake inZ Services HQ DMCCfor $3.94 million

Rationale of the Scheme

As per Scheme

Simplification of holding structure.

B o t h p a r t s a r e i n d e p e n d e n t l y

implemented.

Some Past Transactions

HTML transfer its Multimedia Content

Management Undertaking to HT Digital

Streams Limited (HTDSL) via slump

exchange. 42.83% stake of HTDSL is

Savings in operational and other cost

2016

El imination of inter-company

transaction








April 2021 150/-

DEMERGER

INSOLVENCYPre-packaged Insolvency

Resolution Process

for MSME Corporate Debtors

Cipla demerges

two-business undertakings

ACQUISITIONPiramal gets RBI nod

to acquire DHFL

APL APOLLO:

MERGER OF VALUE

ADDED WITH

MAINSTREAM PRODUCTS



M&A


Motherson Sumi Systems Ltd, one of the country's

biggest automotive component manufacturers, on

Monday announced acquisition of 75% stake in two

Turkish automotive parts manufacturing companies,

Plast Met Plastik Metal Sanayi lmalat ve Ticaret Anonim

$irketi.(PM-Bursa) and Plast Met Kahp Sanayi lmalat ve

Ticaret Anonim $irketi (PM-Istanbul).

Together these two entities are also known as the Plas

Met Group, founded by Turkish entrepreneur Erol Senol,

who will own the residual 25% stake in the companies.

Motherson will invest in these companies through its

subsidiary Samvardhana Motherson Automotive

Systems Group BV.

Through the recent acquisition, the Noida-based

company will gain a toehold in Turkey's domestic market

and will also be able to serve its European customers

better as Plas Met is engaged in manufacturing of

injection moulded parts, sub-assemblies for mirrors, trim

modules and lighting systems. The group also has

capabilities of manufacturing high-end injection

moulding tools that cater to customers in Turkey and

other global markets.

“This acquisition will mark SMR and Motherson group's

entry into Turkey. Turkey is a strategic growth market

The transaction will also enhance Motherson group's

tooling capabilities and complement its existing

manufacturing footprint. Turkey is likely to play a key

role as a competitive sourcing hub and as a platform to

serve the group's customers in the European region, the

company noted.

for the Motherson group, with annual passenger vehicle

production of 1.4mn units and long-term growth

potential. Entry into Turkey is consistent with the

geographic expansion opportunities highlighted in the

recent Vision 2025 presentation," the company said.

“This acquisition marks another step towards the

growth and diversification of Vision Systems vertical and

the group overall. This is the 25th acquisition by

Motherson Group and we will continue to work towards

serving our customers with more products and service

offerings globally. Turkey will be the 42nd country in

Motherson's global operations, which is in line with our

philosophy of 3CX10," said Vivek Chand Sehgal, chairman,

Motherson Sumi.

“Plast Met and Motherson are aligned in their business

objectives and philosophy. Together with the global

know-how of Motherson Group and local expertise of

Plast Met group, I am confident that the alliance will

enhance value to our customers," Erol Senol said.

Motherson Sumienters Turkeymarket throughacquisition of PlasMet Group

Current scheme shall simplify the holding structure whilealso meet regulatory requirements and avail tax benefits

Swap Ratio

acquired by DCL on 28th December 2017

at ~₹77 crores.

2018

In 2018, HTML and Next Radio Limited

(NRL) filed a scheme for demerger of its

FM Radio Broadcasting Division into NML,

an article we covered in our Oct 2018

issue, and, merger of HT Music and

Entertainment Company limited with

NML. This scheme was withdrawn on

20th December 2018 because similar

scheme is filed by NRL for demerger of its

FM Radio Business into Syngience

Broadcast Ahmedabad Limited (SBAL)

but not get approval from Ministry of

Information & Broadcasting. Thereafter,

on 15th April 2019, HTML through open

offer acquired 51% stake of NWL. Further,

on 15th November 2019 HTML acquires

48.6% stake of NRL.

4 equity shares of HTML of ₹ 2 each

fully paid up for every 13 equity shares of

DCL of ₹ 2 each fully paid up.

HTML demerged its Entertainment &

Digital Innovation Business along with

57.17% stake in HTDSL into Digicontent

Limited (formerly known as HT Digital

Ventures Limited) got listed on 18th June

2019 and appointed date for the

transaction is 31st March 2018.

1 equity share of HTML of ₹ 2 each


HTMS of ₹ 10 each fully paid up.

1 equity share of HTML of ₹ 2 each


NMW of ₹ 10 each fully paid up.

Shares to be issued to the shareholders

of HTMS is not considered as after

implementation of HTMS Scheme the

HTML holds 99.41% shares of HTMS.

Promotor others will classify as public on

implementation of scheme.

Related Party trans

action

In FY 2020 DCL pay Rent and

Maintenance of ₹ 16.15 crores to its

holding company The Hindustan Times

Limited and DCL also given a security

deposit of ₹ 15.56 crores to its holding co.

Taxation

At the end of FY 2019-20 HTML has MAT

Credit balance of ₹ 105.74 crore

(Consolidated) while other companies are

paying tax at normal rate, merger will

accelerate the process of setoff of its

MAT Credit on merger of other

companies. Further note that NML and

DCL have accumulated losses of ~₹ 166

crores and ~₹ 5 crores as on FY 2019-20

respectively.

HTML wanted to demerge its FM

Radio business but had to withdraw

the scheme of demerger of FM Radio

business because NRL WoS of NML

failed to get approval from Ministry of

Information & Broadcasting. In fact,

recently Network 18 group also had to

withdraw its scheme as it failed to

obtain approval from SEBI (Securities

and Exchange Board of India) even

after more than 12 months. So, in

cases of businesses where approvals

of other regulatory authorities are

required or other ministries are

involved, one should have proper

strategy to get approval under those

regulations even before going to

honorable NCLT or the shareholders.

The present scheme seems to be

internal restructuring exercise arising

out of cash flow compulsion,

regulatory requirements and in the

process get some tax benefits.

HTML Pre and Post shareholding pattern based on December 2020 Data.

Shareholding pattern

Particulars

Promotors

THE HINDUSTAN TIMES LTD

Others (Classify as Public after implementation of Scheme)

Total Promotors

Public

Employee Trust

Total

PRE-TRANSACTIONSHAREHOLDING (%)

69.51%

0.00%

69.51%

29.56%

0.94%

100%

68.86%

0.45%

69.32%

29.80%

0.88%

100%

POST-TRANSACTIONSHAREHOLDING (%)

Please share your experiences/feedback with

us on [email protected]


Reduction of share capital is often resorted

by companies for internal restructuring or

altering their capital structure; it entails

reduction of issued, subscribed and paid-

up share capital (either equity shares or

preference shares or both) of a company.

The following are the most likely

situations of capital reduction.

2. Capital reduction with pay-out.

1. Capital reduction without pay-out or

B. T o selective shareholders

without pay-out:

This normally happens when the company

Capital reduction

A. T o all the shareholders

has accumulated losses and/or partly

paid-up shares. This is used by companies

to strengthen its balance sheet by

adjusting losses incurred till date against

share capital/other reserve. In those

circumstances as there is no pay out

hence there are not tax consequences. A

capital reduction scheme of Sagar Soya

Products covered as an article in our

June 2018 looks at this scenario.

1. Easy to distribute surplus cash to

shareholders.

2. No limit for distribution like in buyback

or dividend.

with pay-out:

Capital reduction

Advantages of capital reduction with pay

out for the company are:LE

GA

LCAPITAL REDUCTION:

A tool to give back surplus assets to

shareholders or for financial reengineering!

A company intending to embark on theroute of Capital Reduction needs toclearly define its objectives and considerthe implications of various laws.

Padam Singh

scheme of Sagar Soya

Products

https://mnacritique.mergersindia.com/reduction-of-capital-sagar-soya/





3. As a consideration, Company may

give assets to the shareholders which were

not allowed in buyback.

Capital Reduction –

Provisions under the

Companies Act 2013

Selective capital reduction means

reduction of share capital of some

shareholders. It may be noted that the

provisions of section 66 of the Companies

Act, 2013, are very wide and the 2 clauses in

In this context, a question that arises is

whether selective capital reduction is

allowed or not? Even if it is allowed, whether

it has to be optional or can be compulsory?

whether in case of selective compulsory

reduction from minority shareholders, it

amounts to oppression of rights of the

minority by throwing them out without

their will, if they object to the resolution

approving the reduction? Even if they

confirm reduction, but want amendments

to the terms of reduction more

particularly valuation whether their

objections can be considered by

honourable NCLT?

The capital reduction is provided by

section 66 of the companies act 2013 and

its taxability is provided in various

provisions of Income Tax Act 1961. We shall

discuss regulatory and taxation aspects in

case of capital reduction of equity shares.

As generally understood, capital reduction

is uniform for all the shareholders of the

particular class. In this case, it can be

compulsory for all the shareholders to

abide by the order of the honourable NCLT

confirming the special resolution of the

shareholders for the size, amount and

other terms of the reduction.

Section 66 of the Companies Act, 2013,

provides that, for a company to reduce its

share capital, it should have the power

under its Articles of Association (AOA) to

do so. Thereafter, a special resolution for

reducing share capital must be passed by

shareholders . Subsequent ly , the

reduction effected by such special

resolution must be confirmed by the

National Company Law Tribunal (NCLT).

section 66(b) of the Companies Act, 2013

are illustrative and not exhaustive.

Furthermore, could such a selective

capital reduction have to be optional in

nature? i.e. shareholders get an option if

they wish to tender their shares or not;

usually, in most cases before Honourable

NCLT in a capital reduction application/is

“across the board; and, once approved by

the NCLT, it is binding on shareholders

whether they objected to the reduction or

not.

Recently Supreme Petrochem Limited

announced reduction of share capital by

reducing face value of its shares from Rs 10

to Rs 4 by paying ₹ 6 to equity

shareholders to all the shareholders.

Pursuant to section 230(12) Aggrieved

party can file an application before NCLT

against the Application filed under section

230 (11) with the NCLT.

Capital Reduction:

Provisions under the

INCOME TAX ACT 1961

For Shareholders

The reduction of capital would first need to

In past, several companies like Cadbury

India Limited, Phillips India Limited, UTV

Software, Atlas Capco etc used selective

capital reduction as a tool to give exit to

dissenting minority shareholders after

delisting.

Deemed Dividend Provision

Pursuant to section 230 (11) of the

Companies Act, 2013, a member of the

Company alone or along with any other

members holds 75% shares in a

Company, can file an application with the

Hon’ble NCLT for acquiring any part of the

remaining shares of the Company held by

minority shareholders.

If the Application filed under section 230

(11) is approved by the NCLT, minority

shareholders share will be transferred to

majority pursuant to the order of

honorable NCLT.

be examined from the perspective of

deemed dividend under section 2(22)(d) of

the Income Tax Act, 1961, which provides

that, to the extent the company

possesses “accumulated profits” ,

proceeds of capital reduction would be

considered as a deemed dividend.

Obviously, under the new dispensation

for dividend taxation, such amounts

would be taxable in the hands of the

shareholders, subject to withholding of

taxes by the Company. To the extent that

the amount of capital reduction exceeds

the amount of accumulated profits, it

would be taxable as capital gains in the

hands of the shareholders. This was so

held by the Supreme Court in G.

Narasimhan [[1999] 236 ITR 327 (SC)], i.e.

that any distribution over and above the

“accumulated prof i ts” would be

chargeable to capital gains tax in the

hands of the shareholders.

It is important to determine as to what

would be covered by the term

‘accumulated prof i ts ’ . The term

accumulated profits are not defined in the

IT Act and the courts have interpreted the

term in various judicial precedents.

The Supreme Court of India in case of P.K.

Badiani vs. CIT held that 1977 AIR 560

‘accumulated profits’ are profits made by

the company in the real and true sense and

not merely assessable or profits liable to

tax as a company distributes dividend out

of its business profits and not out of its

assessable income. Further , the

explanation to section 2(22) of the IT Act

provides that accumulated profits up to

the date of distribution or payment

should be considered.

The question also arises as in the case of

Supreme Petrochem Limited where the

company proposes to pay by reducing

face value of the shares will be considered

as deemed dividend under section

2(22)(d). Whether it will make any

difference if company have accumulated

profit or not. In our view, to the extent the

company possesses “accumulated

profits”, proceeds of capital reduction

would be considered as a deemed

dividend under Sec 2(22) (d).

Selective capital reduction – context to

accumulated profits

Supreme Court in G .

Narasimhan [[1999] 236 ITR 327 (SC)] ,

1977 AIR 560

Recently Supreme Petrochem Limited

https://indiankanoon.org/doc/444058/

https://taxguru.in/income-tax/deemed-dividend-accumulated-profits-include-current-years-business-profit-accues-year.html

https://www.bseindia.com/xml-data/corpfiling/AttachHis/25a8fda8-3242-4785-8c6c-c23cd33eb49d.pdf










In case of selective capital reduction there

are two views in relation to accumulated

profits:

1. Accumulated profits to be considered

for deemed dividend are linked with the

proportion of value of shares held by the

shareholders who accept the offer or

There is no specific provision in the Act

dealing with this. However, the matter was

settled by the decision of the Supreme

Court in the case of G. Narasimhan [1999]

102 Taxman 66 (SC), wherein it was held

that any distribution over and above the

a c c u m u l a t e d p r o f i t s w o u l d b e

chargeable to capital gains tax in the

hands of the shareholders. It was also

held that reduction in capital will be

construed as a transfer within the

meaning of section 2(47) of the Act.

• The existence of a 'capital asset’.

• There should be a 'transfer' of such a

capital asset; and

Consideration should be received or

receivable on transfer of such a capital

asset.

2. Accumulated profits are not linked

with the proportion of value of shares held

by the shareholders who accept the offer.

The charging section 45 read with section

48 of the Act requires the following for

taxability of profits or gains from transfer

of a capital asset as capital gains:

Capital Gains Tax Provision

Definition of ‘Transfer’

Section 2(47) “transfer” in relation to a

capital asset includes:

• the extinguishment of any rights

therein;

The transaction must qualify as 'transfer' is

one of them and it includes relinquishment

of a capital asset or extinguishment of

rights in the capital asset. In the case of

capital reduction, the rights of the

• the sale, exchange or relinquishment

of the asset; or

To sum up, if capital reduction with pay-out

and considerat ion is more than

‘accumulated profits’ of company then

required to calculate capital gain.

The other issue that arises is whether in

absence of any consideration or

consideration lesser than investment

amount being received by the shareholder

on account of reduction of share capital,

loss under the head Capital Gains can be

claimed.

Capital loss in hands of

shareholders on account of

reduction of share capital

shareholders to the dividend on share

capital and the right to share in the

distribution of the net assets upon

l i q u i d a t i o n i s e x t i n g u i s h e d

proportionately to the extent of reduction

in number of shares, thereby, qualifying

as 'transfer' by way of extinguishment of

the rights in the capital asset i.e., shares.

When the company has accumulated

losses and/or partly paid-up shares in

those circumstances as there is no pay out

hence there is no consideration is received

by the shareholders, in that case there is

no reduction in any rights of the

shareholders to the assets of the

company as it is just an adjustment of

losses with the capital, and nothing is

f l o w i n g f r o m c o m p a n y t o t h e

shareholders to compensate such capital

reduction. Thus, there is no 'transfer' in

that case.

In this regard, the Special Bench of the

Mumbai ITAT in Bennett Coleman vs. ACIT

TS-580-ITAT-2011 had disallowed a

shareholder's claim for capital loss on

Therefore, in case of capital reduction

selective or not with pay-out tantamount

to ‘transfer’ liable to capital gain tax.

reduction of share capital since the

s h a r e h o l d e r ' s p e r c e n t a g e o f

shareholding, immediately before

reduct ion of share cap i ta l and

immediately after such reduction,

remained the same. Also, there was no

c o n s i d e r a t i o n r e c e i v e d b y t h e

shareholder in lieu of reduction of share

capital and hence, the Tribunal termed

the shareholder's claim as merely a

notional loss which was not allowed.

The Bangalore ITAT in the case of M/s

Jupiter Capital Pvt. Ltd. vs. ACIT (dated 29

November 2018) allowed the claim for

capital loss on account of reduction in

share capital of the company. However, in

this case, it is pertinent to note that the

assessee received some consideration on

account of capital reduction, which is a

different fact pattern, as compared to the

Bennett Coleman case (Supra) wherein no

consideration was received. It seems that

even in the Bennett Coleman case, there

should have been a deduction allowed,

since clearly there has been a loss

incurred even more so, since nothing is

received. Take the other view which the

Bombay Tr ibuna l d id , puts the

s h a r e h o l d e r s a t a s u b s t a n t i a l

disadvantage from a commercial

standpoint also.

Applicability of section 50CA

Section 50CA provides for the fair market

value (FMV) of shares as the full value of

consideration in case of transfer of unlisted

shares irrespective of actual consideration

paid. For the applicability of section 50CA

consideration is must if consideration is

absent/no consideration, then section

50CA may not apply. Further, when the

distribution does not exceed accumulated

profits, relying on the principles of the

Supreme Court of India in the case of G.

Narasimhan (Supra), there should be no

tax implications under section 50CA of IT

Particular

- Up to the extent it is treated as

deemed dividend as per section

2(22)(d) – max. 30% plus

surcharge/cess.

- Beyond such deemed dividend,

taxable as capital gains at the rate of

20% plus surcharges, if long-term in

nature and 15% if short term.

Either Cash or kind both allowed.

Taxable under section 115QA at the

rate of 20% plus surcharge/cess

payable by the company

Only in cash as per rule 17(10)© of

Share capital and Debenture’s rule

2014 of the companies act 2013.

Taxability

Consideration

Capital Reduction Buy-back

We summarize above analysis with the following example: -

Taxability

Accumulated Profit

Amount paid on Capital reduction

Taxable Income

- Deemed Dividend 2(22)(d)

- Capital gain

Scenario 1

200

100

100

NIL

Scenario 2

200

250

200

50

Scenario 3

NIL

100

NIL

100


In this context, it is important to note that in

order to trigger chargeability under

Section 56(2)(x) of the Act, the following

conditions must be cumulatively satisfied:

However, in case of capital reduction, the

shares are cancelled immediately on the

scheme becoming effective. Therefore, in

essence, the company does not receive

any property and therefore, should not be

subjected to tax. This view has been

(b) the receipt should be for a

consideration which is less than the FMV of

such 'property'.

(a) the recipient must 'receive' specified

'property' from another person; and

Therefore, Section 50CA may not apply in

case of capital reduction without any pay-

out, as no consideration is received.

However, in case of capital reduction with

pay-out which is more than accumulated

profits, section 50CA may apply. The

question is whether the entire FMV of the

shares shall be considered or only the

FMV over and above the accumulated

profits. On a plain reading of the section, it

appears that the entire FMV must be

considered, resulting in double taxation to

the extent of accumulated profits.

However, on the issue of double taxation

the SC in Laxmipat Singhania V/s CIT,

UP-1968 (8) TMI 8 held that “it is

fundamental rule of law of taxation that,

unless otherwise expressly provided,

income cannot tax twice”. Double taxation

may be permitted if expressly provided in

law.

Taxing Statute should not be interpreted in

such a manner that its effect will be to cast

a burden twice over the payment of tax on

the taxpayer unless the language of the

statute is so compellingly certain that the

court has no other alternative than to

accept it. (Tata Steel & Iron Co., v. Union of

India 75 ITR 676)

For Company

Applicability of section 56(2)(x) in

case of capital reduction

Act as this section is only for the purpose

of calculating capital gains under section

48 of the IT Act.

Difference between

buyback and capital

reduction from

Income Tax perspective:

The following legal position needs to be

considered whether capital reduction is or

not buyback:

There is also ambiguity around whether

capital reduction can be considered as

buyback of shares. Under section 115QA of

the Act, the buyback attracts buy-back tax

(BBT) on the difference between the

buyback proceeds and issue price of

shares by the company. Therefore, if

capital reduction is classified as buyback,

the company may be required to pay BBT

on the same.

upheld in the context of buyback by the

Mumbai Tribunal in the case of Vora

Financial Services Pvt. Ltd. ITA No.

532/Mum/2018 as well. Further, the cost

of the property which has been subject to

taxation under section 56 has been

specifically provided under section 49.

This implies that for section 56 to apply,

the property should remain in existence

even after receipt, which necessitates

providing for a cost for such properties in

section 49. Based on the above

arguments, one might possibly argue

that section 56 should not apply to capital

reduction.

"buy-back" means purchase by a company

1. Section 115QA deals with taxation on

Buy-Back a. Explanation to section 115QA

provides definition of Buy-back:

3. If capital reduction is also to be taxed

under section 115QA, then section 2(22)(d)

will become redundant, which cannot be

the intention of law. But as 115QA is

introduced recently and starts with non-

obstante clause hence may be considered

as overriding the earlier provisions.

of its own shares in accordance with the

provisions of any law for the time being in

force relating to companies. However,

before amendment it referred to the

particular section i.e. the section 77A of

the Companies Act,1956 and not the Act.

So, in one view reduction of capital also

may get transaction covered under this

section as The Act provides for the

provisions relating to buyback and capital

reduction.

2. Taxability on capital reduction to the

extent the company possesses

“accumulated profits”, proceeds of capital

reduction would be considered as a

deemed dividend as per section 2(22)(d)

and above accumulated profits taxable

under capital gain tax as per Supreme

Court decision in G. Narasimhan [[1999]

236 ITR 327 (SC)]. However, taxability of

buy-back as deemed dividend is

specifically excluded from section 2(22) of

Income Tax Act.

The question arises that as in section

115QA specifically not mentioned as earlier.

Can AO attract both section, section 115QA

in the hands of Company and 2(22)(d) in

the hands of Shareholders.

If one, consider taxability of capital

reduction as per section 115QA then

companies may distribute entire

accumulated profits to the shareholders

via capital reduction by paying lessor tax.

Particular

- Up to the extent it is treated as

deemed dividend as per section

2(22)(d) – max. 30% plus

surcharge/cess.

- Beyond such deemed dividend,

taxable as capital gains at the rate of

20% plus surcharges, if long-term in

nature and 15% if short term.

Either Cash or kind both allowed.

Taxable under section 115QA at the rate of

20% plus surcharge/cess payable by the

company

Only in cash as per rule 17(10) (C) of Share

capital and Debenture’s rule 2014 of the

companies act 2013.

Taxability

Consideration

Capital Reduction Buy-back


companies act which provides proper

scheme to give compulsory exit to

small and minority shareholders.

Therefore, companies planning to

undertake capital reduction should

consider all the tax and regulatory

impl i cat ions carefu l ly before

proceeding.

implications of the Companies Act,

2013 as also the possibility of a

regulatory roadblock . Recent

amendments to the companies Act,

2013 by notifications of Sec 230(11)

and Sec 230(12) and amendment to

sec 115QA has made decision making

more difficult. But all the decisions

referred to are before notification of

Sec 230(11) and 230(12) of the

Considering all the issues enlisted

above, it is evident that capital

reduction is easier said than done.

One needs to look at it from multiple

dimensions not limiting to corporate

law provisions, accounting issues,

FEMA aspects and tax, and a

company intending to embark on this

route needs to clearly define its

ob ject ives and cons ider the

NATIONAL NEWS

M&A


CompetitionCommissionapprovesBigBasket's 64%stake sale to Tata Digital

The Competition Commission of India (CCI) has

greenlit Tata Sons' proposal to acquire a majority stake

in Alibaba-backed BigBasket, setting the stage for a

battle of the giants in the country's fast-growing online

grocery segment.

Tata Digital is likely to buy out Alibaba, which holds

27.58% stake and Actis LLP, which acquired several

portfolios of scandal-hit Abraaj Group, and owns 18.05%

stake in BigBasket. Some other smaller investors in the

online grocery startup are also expected to get an exit.

Tata Digital, a wholly-owned subsidiary of Tata Sons, had

sought CCI's approval to acquire a 64.3% stake in

Supermarket Grocery Supplies, the business-to-

business arm of BigBasket, through a mix of primary and

secondary share purchases.

Subsequently, through a separate transaction,

Supermarket Grocery Supplies may acquire sole control

over Innovative Retail Concepts which operates

BigBasket's online retail business, giving Tata control

over both wholesale and retail business units.

The deal could also include a plan to take BigBasket

public by 2022-23, giving investors who remain an upside

in the near future.

According to market researcher RedSeer Consulting,

India's grocery market was over $600 billion in 2019 and

has the potential to grow to over $850 billion by 2025.

However, majority of this market is still controlled by

unorganised retailers, largely kiranas, presenting a huge

room for growth for organised players.

The transaction, which marks one of the largest M&A

deals in India's digital sector, will put Tata in direct

competition with Reliance's Jio Mart, Amazon and

Walmart-owned Flipkart, apart from SoftBank Vision

Fund-backed Grofers.

BigBasket is currently the leader in the online grocery

segment and claims to have crossed the $1 billion annual

revenue run rate. While Amazon and Flipkart are far

larger in terms of reach in India, their online grocery

businesses still make up a very small chunk of sales

despite them making concerted efforts to grow in the

segment for the last two years.

With this acquisition, JSW Steel will havesuccessfully acquired three stressedassets through bankruptcy court

process produces and supplies Pig Iron

and Cement. It also produces Low Ash

Metallurgical Coke, Sinter and Power for

captive consumption in its integrated

complex. SPL is associate company of

ECL.

The Transaction

Exchange ratio: 59 shares of ECL of Rs 1

each for Every 10 Shares of SPL of Rs 10

each.

SPL is proposed to be merged with ECL

through scheme of merger. Appointed

date for the same is 01st October 2020.


What Is M&A And How

M&A Consulting Firms

Can Help?

Furthermore, IFLR reports also state that

in 2020, the M&A deal flow in India itself

crossed 82 billion USD in aggregate deal

value, which is a 22.9% increase from 2019.

This is an impressive growth despite the

stark market uncertainties and the

country's complex financial and market

structure. Moreover, such whooping

transactions also establishes why

formulating a proper merger and

acquisition plan has become important

for foreign organizations which are

planning to invest in the Indian industrial

sectors.

Did you know, in 2020, India and the USA

dominated the inbound & outbound M&A

segment, with cross-border transactions

totaling about 15 billion USD?

However, India's diverse culture,

complicated legal procedures, and

intricate business structure act as a

s ignif icant chal lenge for foreign

organizat ions trying to execute

transactions or gain partnership in India.

That is why it has become imperative for

foreign companies to consult reliable

mergers and acquisitions consulting firms

in India that can ensure fair deals and

suitable business opportunities in the

country.

M&

A

A Comprehensive Insight into Mergers and Acquisitions

SBI initiatesinsolvencyproceedingsagainst Videoconpromoters

The total Videocon group exposure to creditors led by

SBI is Rs 57,444 crore. Last month lenders voted in favour

of Vedanta Group's Twin Star Holdings at a whopping

88% haircut to a part of the company's business

including its oil and gas assets which had outstanding

loans of Rs 30,000 crore. Two other companies are

undergoing bankruptcy process separately.

Videocon has 54 financial creditors led by SBI which

owns19.15% of the debt. Vedanta's proposal is awaiting

the nod from the NCLT.

Chairman Venugopal Dhoot is already under CBI

investigation on charges of causing a wrongful loss to a

consortium of Indian PSU banks led by (SBI) which

according to the investigating agency has caused

wrongful gains to Videocon.

SBI has been aggressively invoking personal guarantees

of defaulting promoters as it seeks to increase recover

especially in stressed assets which yield low recoveries.

In September it had similarly invoked the personal

guarantees of Bhushan Power & Steel promoter Sanjay

Singal which is undergoing a long drawn process.

A Mumbai bench of the National Company Law

Tribunal (NCLT) has initiated personal insolvency

proceedings against Videocon Industries promoters

Rajkumar Dhoot and Pradipkumar Dhoot adding to the

Dhoot family's problems even as they are under

investigation by the Central Bureau of Investigation

(CBI).

In a petition filed by Videocon resolution professional

Asish Narayan on behalf of the group's largest lender

State Bank of India, insolvency petitions have been

initiated against the Dhoots in their capacity as personal

guarantors to recover dues from the company.

In two separate petitions both seen by ET, SBI has

sought to invoke Rs 6158 crore of personal guarantee

given by Pradipkumar Dhoot to pay off the oustanding

loans of the group while Rs 5353 crore has been sought

to be recovered from Rajkumar Dhoot against the

guarantee given by him for a mix of term and working

capital loans granted to the company over the years.

These petitions will be taken up again on January 27.


Now that you have learned about the

difference between the two, let's have a

look at the types of mergers and

acquisitions.

Conglomerate

Horizontal M&A is the coming together of

two business organizations that trade on

Merger & Acquisition: A brief

understanding

The Four Main Types of Mergers and

Acquisitions

Acquisition: Acquisition, on the other

hand, refers to a business and financial

transaction in which an organization

comes to acquire all the market shares

and assets of another company such that

it gains complete control over that

respective firm.

When two companies belonging to

completely different industries and

having distinct supply chains combine

their forces, it is known as conglomerate

M&A. This approach helps to reduce costs

and also reduce investment risks as it

allows operating in a range of industries.

C o n c e n t r i c M & A r e f e r s t o t h e

collaboration of two companies that

share the same customer base but trade

in different products and services. This

helps organizations to diversify the

offerings, and therefore, earn higher

returns in the long run.

Merger and acquisition is an act of

consolidating companies through various

types of financial transactions. This

practice is undertaken with an aim to

stimulate growth, increase market share

and gain a competitive edge in the

business. However, though "merger" and

"acquisition" are used as synonymous

terms, both are considerably different

and need to be understood first to

formulate correct business plans.

Merger: Merger refers to a business

transaction in which two companies come

together to combine forces and form a

new, joint entity under the banner of a

new corporate name.

Concentric

Horizontal

similar products and services. This allows

the collaborating firms to expand the

supply chain range and increase market

share, thereby reducing competition in a

similar marketplace.

Vertical

Vertical M&A is a business transaction in

which two companies belonging to the

same industry but trading on different

products and services combine their

forces. This helps them become more

vertically integrated and improve

logistics, supply chains, consolidate a

considerable number of staff for smooth

business operations, etc.

Stages Of Merger And

Acquisition

For an adequate execution of the merger

a n d a c q u i s i t i o n p l a n , f o r e i g n

organizations must duly focus on the four

To decide which type of merger and

acquisition plan will work best for you, it is

important to focus on the goals you want

to achieve while investing in the Indian

p l a y g r o u n d . F u r t h e r , d e t a i l e d

consu l tat ion f rom mergers and

acquisitions consulting firms in India will

also help foreign organizations to decide

the right course of action.


This is the primary step that you must

focus on while executing an M&A

business plan. This involves identifying

the motivation and potential targets,

deciding upon the type of M&A you want

to proceed with, and the amount of capital

you are willing to spend.

Structuring and Negotiation

Next, you must focus on deal strategy,

negotiation, and deal valuation. You must

use the products of your valuation of a

target company to create an initial deal

and carry forward with the negotiation. In

this phase, both the parties have to agree

on equal terms.

Next, you must perform due diligence.

This involves creating financial modeling

and operational analysis of the target

Performing Due Diligence

main stages that are explained below.

Deal preparation

Post-Acquisition Integration

firm with an objective to ensure there are

no discrepancies in terms of information

shared by the target firm and based on

which the deal was finalized.

The last step involves signing the deal and

getting involved in combining the forces

and integrating the firms with thorough

p l a n n i n g o n t h e f i n a n c i a l a n d

organizational structure.

However, drafting an elaborate plan for

this stage and ensuring proper merger

and acquisition transactions require

professional help. Therefore, it is essential

that you avail assistance from a reliable

merger and acquisition consulting firm,

like Tecnova. With extensive experience

and understanding of the intricate

business structure in India, Tecnova

offers an end-to-end assistance in

structuring and execution of M&A plans

for foreign clients to ensure sustainable

growth.

With 100% FDI and other attractive

government schemes, India is certainly

emerging as a lucrative ground for

foreign investors. However, without an

adequately formulated merger and

acquisition plan gaining a strong foothold

in Indian industries (where about 90% of

the businesses are family-owned) is

highly inconvenient. Therefore, it is

essential for foreign organizations to

actively collaborate with merger and

acquisition consultant firms.

From identifying targets, structuring

deals, closing the transaction, and 100%

post-deal integration, Tecnova covers it

all with the help of highly experienced

merger and acquisition professionals. It is

one of the leading mergers and

acquisitions consulting firms in India. The

company has over 35 years of experience

in the field and has over 1400 clients

worldwide. It is also an exclusive Indian

member of the "Pandion Partners," which

is a leading international network of

banking boutiques and corporate

advisory firms.








May 2021 150/-

Airtel Rejig: Value

Creation or

Compulsion?









COV

ER

ST

OR

Y

Airtel Rejig: Value

Creation or Compulsion?Anirudha Jain


Over the period, Bharti Airtel has become a conglomeratehaving portfolio ranging from physical assets including towerinfrastructure, telecommunication business and new agedigital business and having value added digital services

In 2019-20, Reliance Industries Limited did

raise. Recently, its competitor, Bharti

Airtel Limited announced a new

corporate structure which will enable

company to place its entire “Telecom

Business” into an unlisted subsidiary

most likely followed by entry of

strategic/financial investors.

Bharti Airtel Limited (“BAL”) is a global

communications solutions provider in 18

countries across South Asia and Africa.

The company ranks amongst the top

three mobile operators globally and its

networks cover over two billion people.

Airtel is India's largest integrated

communications solutions provider and

the second largest mobile operator in

Africa. Airtel's retail portfolio includes

high speed 4G/4.5G mobile broadband,

Airtel Xstream Fiber with convergence

a c r o s s l i n e a r a n d o n d e m a n d

entertainment, streaming services

spanning music and video, digital

payments, and financial services.

Indian Telecom Business

Digital Business (Wynk Music, Airtel

X stream, Airtel Thanks etc)

Currently BAL along with its subsidiaries

is engaged in the business of:

International Telecom Business

Telecom Infrastructure Business

Payment Bank

To sharpen the focus of the company in

driving the rapidly unfolding digital

opportunity in India while enabling it to

unlock value, BAL announced new

s t r u c t u r e w h i c h w i l l e n v i s a g e

consolidation of all Digital Business into

Bharti Airtel Limited followed by

demerger of Telecom Business.

Airtel Payments Bank will remain a

separate entity under Bharti Airtel and

work closely with the growing customer

base to play a pivotal role in realising the

digital opportunity that payments and

financial services provides.

All the company's infrastructure

businesses such as Nxtra and Indus

Towers will continue to remain in

separate entities as they are currently.

So will international subsidiaries and

affiliates.

Nettle Infrastructure Investments

Limited (“Nettle”) is engaged in

promoting, establishing and funding

companies engaged in the business of

providing telecom services and other

companies engaged in the activities

ancillary to the telecom industry.

Airtel Limited is a newly incorporated

company incorporated to house Telecom

Business undertaking.

The demerger intended to house all the

telecom businesses in a newly created

entity, Airtel Limited – a wholly owned

subsidiary of Bharti Airtel Limited. Bharti

Telemedia, the 100% arm operating DTH

services will sit alongside Airtel Limited

for now. It is intended to eventually fold

the DTH business into Airtel Limited to

move towards the NDCP vision of

converged services to customers. The

company has moved the government to

seek clarity on licensing policy given that

Telesonic Networks Limited is engaged

is designing, planning, deploying,

optimizing and managing broadband and

fixed telephone networks across India.

Telesonic also holds a registration

certificate for infrastructure provider

category-I (IP-I) and is engaged in the

business relating to optical fiber cable

(including underground and over ground

cables).

Airtel Digital Limited is engaged in

procurement, aggregation, and provision

of content services to its B2B and B2C

customers and in the provision of OTT

services which include 'Airtel Thanks' app

for self-care, 'Airtel Xstream' app for

video, 'Wynk Music' for entertainment and

'Airtel BlueJeans' for video conferencing.

The above-mentioned structuring will be

ach ieved through a scheme of

arrangement whereby:

A m a l g a m a t i o n o f N e t t l e

Infrastructure Investments Limited, Airtel

Digital Limited, and Telesonic Networks

Limited, wholly owned subsidiaries with

and into Bharti Airtel Limited; and

“Telecom Business Undertaking” means

entire telecom business carried out by

BAL including mobi le . Fixed l ine

telecommunication, broad band services,

spectrums, Licenses etc. Remaining

Business will its international telecom

business, Digital Business such as

content services to its B2B and B2C

customers and also in the provision of

OTT services which include 'Airtel Thanks'

app for self-care, 'Airtel Xstream' app for

video, 'Wynk Music' for entertainment and

'Airtel BlueJeans' for video conferencing,

Fiber optic, payment business, Tower

infrastructure business etc.

Current ly , Nett le In f rastructure

Investments Limited, Airtel Digital Limited,

Telesonic Networks Limited, and Airtel

Limited, are directly/indirectly wholly

owned subsidiaries of BAL.

Demerger of the Telecom Business

Undertaking of Bharti Airtel Limited and

vesting of the same with Airtel Limited, its

wholly owned subsidiary on a going

concern basis subsequent to the

c o m p l e t i o n o f t h e a f o r e s a i d

amalgamations.

carriage i.e., telecom and DTH is currently

being regulated and managed under two

separate ministries of Communications

and I&B respectively.

TRANSACTION

OVERVIEW


This new corporate structure will enablecompany to place its entire “TelecomBusiness” into an unlisted subsidiaryand allow entry of strategic/financialinvestors.

Reliance Industries Limited did

multiple re-jigs to ready ins telecom arm

Reliance Jio Limited for massive fund

raise.

https://mnacritique.mergersindia.com/indus-towers-bharti-infratel-merger-exit-idea/







Airtel’s new corporate structure

Digital

Bharti Airtel LimitedIndia

Airtel Limited

(Mobile Broadband & Enterprise)

Bharti Telemedia limited (DTH)

Bharti Hexacom Limited

(North East & Rajasthan)

Plans to sold into

Airtel Limited

Airtel Payment

Bank Limited

International Infrastructure**

Nxtra Data Limited

(Data centers)

Indus Towers Limited

** will house future shared and

common infrastructure assets

Airtel Africa PSc

Network i2i Limited

Submarine taxes and

foreign investment

Bharti Airtel Lanka

(Private) Limited

Robi Axiata Limited

(Bangladesh)

The Appointed Date for the transaction is

Effective Date i.e., on following order

sanctioning the scheme with Registrar of

companies post approval by al l

government authorities.

Scheme also clarifies that the 'Airtel'

brand shall continue to be owned by BAL.

As part of the demerger of the Telecom

Business Undertaking, Airtel Limited shall

have the right to use the 'Airtel' brand for

a period of 5 (five) years from the

Appointed Date without payment of any

royalty or fees to BAL. BAL and Airtel

Limited may enter into agreements in

re lat ion to the aforement ioned

arrangements for the 'Airtel' brand.

Further , the Te lecom Bus iness

Undertak ing has var ious inter-

dependencies with the Residual Business

of BAL and, therefore, under Scheme, BAL

proposes to undertake various business

relationships with Airtel Limited, on an

arms' length basis including indefeasible

right to use the optical fiber network of

BAL. All the existing arrangement with

various group companies will continue in

future. Considering the current equity shares of

BAL, swap ratio is:

Upon demerger of “Telecom Business

undertaking” into Airtel Limited, the

scheme envisages issuance of non-

participating, Compulsorily Convertible

Preference Shares (“CCPS”) to the equity

shares of BAL as a consideration. Further,

based on the management decision, it is

proposed that the number of CCPS shall

not exceed 1,25,000 and thus, accordingly

swap ratio has been arrived by the valuer.

Consideration:


TRANSACTION OVERVIEW

AIRTEL DIGITAL LIMITED

~airtel digital

r

..

MERGER

Nettle Infrastructure Investments Limited

MERGER

'

airtel BHARTI AIRTEL LIMITED (BAL)

TELECOM BUSINESS

DEM ERGER of TELECOM

BUSINESS

TELECOM INFRA

BUSINESS

f) air tel

AIRTEL LTD

DIGITAL BUSINESS

M&.A

TELESONIC NETWORK LTD.

(£) telesonic natwork• ltd.

MERGER

SOl.Jf'C« Company's Annval Repon and Presmtarion

I -


M&A Highlights of Bharti Airtel from inception

Particular Action on Merger of RMG II with Merger Sub

Shares held by PubCO in Merger Sub

RMG II Units

RMG II Class A share

RMG II Class B Share

RMG II Warrants (Public and Private)

Will get cancelled

Shall be automatically detached and the holder thereof

shall be deemed to hold one RMG II Class A Share and

one-third of an RMG II Warrant.

Shall be cancelled in exchange for the issuance by PubCo

of one PubCo Class A Share

Shall be cancelled in exchange for the issuance by PubCo

of one PubCo Class A Share

Each RMG II Warrant shall remain outstanding but shall be

automatically adjusted to become a warrant to purchase

1.0917589 whole PubCo Class A Shares

ParticularsNumber

INR 100 per share

0.01%

Each of the outstanding CCPS shall automatically and mandatorily be

converted into equity shares on the Mandatory Conversion Date.

“Mandatory Conversion Date” means the earlier of or (i) the date falling on the

10th anniversary of the issuance of CCPS; or (ii) the date on which the CCPS

are required by Applicable Law to be mandatorily converted into equity

shares.

10 (Ten) equity shares of Rs. 10 (Indian Rupees Ten) each against 1 (One)

CCPS of Rs. 100 (Indian Rupees One Hundred) each.

Face Value

Dividend Rate

Conversion Time

Conversion Ratio

Key Terms of CCPS:

Particulars Number

Existing Equity Shares of Airtel Limited

Proposed Issue of equity shares to BAL and/or

its WoS (Wholly Owned Subsidiary)

Total Equity Shares after issue

Issue of CCPS

Conversion Ratio

Equity shares to be issued on conversion.

10,000

49,87,40,000

49,87,50,000

1,25,000

10

12,50,000

So immediately after the Effective Date, the capital structure of Airtel Ltd will be as follow: -ParticularsNumber

The Scheme also provides for certain

threshold for issuance of CCPS. Any

shareholder entitled to CCPS less than 10

(or a lower number as per threshold to be

determined later) shall receive cash in lieu

of CCPS based on fair market value as on

the Effective Date to be computed by the

registered valuer. Thus effectively,

shareholder holding less than 4,39,360

shares of BAL may not receive any CCPS.

1 (one) paid up CCPS (Compulsorily

Convertible Preference Shares) of Face

Value of INR 100 each of Airtel Limited for

every 43,936 (Forty-Three Thousand

Nine Hundred and Thirty-Six) equity

shares of BAL.

Any shareholder entitled to fractional

CCPS shall receive cash in lieu of CCPS on

the basis of fair market value as on the

Effective Date. CCPS issued by Airtel

Limited will not be listed on any

exchanges.

Foreign Currency Convertible Bonds

('FCCBs') issued by BAL, which if

converted into equity shares before the

record date then the share entitlement

ratio will be modified such that the total

number of CCPS to be issued as per

revised ratio does not exceed the total

number of CCPS that BAL's shareholders

might be entitled to as per the present

entitlement ratio, as if no dilution would

have happened because of FCCB (Foreign

Currency Convertible Bonds) holders.

Further, to comply with the definition of

demerger as per section 2(19AA) of

Income Tax Act, 1961 it is also proposed

that if the equity shareholders of BAL

entitled to receive cash consideration

under hold more than one-fourth in value

of the equity share capital of BAL, then

the threshold number shall stand

reduced to the nearest whole number

such that equity shareholders holding

not less than three-fourths in value of the

equity share capital in BAL become CCPS

holders of Airtel Limited.

The said swap ratio & Threshold may

undergo change depending upon:

Particulars Amount

Existing Market Cap of BAL (as on 5.5.21)

Assigned Equity Valuation of Telecom Business

Estimated Assigned Enterprise Valuation to Telecom Business

% Of CCPS (after conversion)

Total estimated value of CCPS

Number of CCPS

Value per CCPS

3,07,500 crores

1,79,670 crores

2,94,083 crores

0.25%

449.2 crore

1,25,000

36,034 per share

Valuation of Telecom Business & CCPS

Particulars %

BAL

CCPS holder (after conversion)

Total

99.75%

0.25%

100%

49,87,50,000

12,50,000

50,00,00,000

Number

Post conversion Likely capital structure and shareholding of Airtel Limited will be as follow:

Above shareholding is assuming that no shares were tendered during Exit Mechanism.

Particulars

Enterprise Value

Equity Value

Reliance “Digital” Business segment Revenue for FY 2020

4,61,632 crores

4,21,000 crores

54,316 crores

Number

Estimated Valuation given to Reliance Jio (RJIO) by at a time of Fundraise by Facebook

Particulars Amount

Number of Shares

CCPS entitled

Value per CCPS

Cash consideration to be received

Cash Per Share

1000

0.0023

36,034

INR 820

INR 0.82

The above value may change subject to valuation of CCPS on effective date.


Particulars9M ended on31st December2020

Standalone Revenue of BAL

Consolidated Revenue of BAL

Revenue of Telecom Business getting transferred.

% Of Telecom Business Revenue to standalone Revenue of BAL

% Of Telecom Business Revenue to consolidated Revenue of BAL

Standalone Debt*

Net Consolidated Debt

490,749

754,274

483,366

98.5%

64.1%

Not Available

14,74,382

31st March2020

565,596

862,122

Not Available

Not Available

Not Available

7,77,804

12,45,209

INR in million

FinancialsFinancials of BAL/Telecom Business of BAL

*: Excluding current maturities of long-term debt.

Particulars Telecom Business

Total Debt (Net of current portion for BAL)

Lease Liabilities

Cash & Cash Equivalent

Investments

Net Debt including Lease Obligation.

8,56,304

3,00,160

4,975

4,664

11,46,725

BAL-Consolidated

12,54,557

3,24,529

98,344

6,360

14,74,382

INR in millionMovement of Debt as on 31st December 2020:

Indus Towers: Worlds largest tower

Providence?

TATA TELESERVICES TO SELL

BHARTI AIRTEL

Airtel: Creating Numero Uno position

in VSAT Business

Post-transaction

Structure:

Few articles we covered

AIRTEL acquires Telenor

The proposed Scheme also provides for

Airtel Limited shall issue to BAL and/ or its

(direct or indirect) wholly owned

subsidiaries 49,87,40,000 equity shares

at Rs. 10/- per equity share, fully paid, at

Indus Towers: World’s largest tower

AIRTEL acquires Telenor

TATA TELESERVICES TO SELL

Airtel: Creating Numero Uno position

in VSAT Business

c o m p a n y : F o r c e d E x i t b y i d e a &

Providence?

CONSUMER MOBILE BUSINESS TO

BHARTI AIRTEL


https://mnacritique.mergersindia.com/airtel-telenor-merger/

https://mnacritique.mergersindia.com/tata-teleservices-acquisition-bharti-airtel/

https://mnacritique.mergersindia.com/bharti-airtel-hughes-communication-merger-vsat-services/

M&A Highlights of Bharti Airtel from inception




















ParticularsNumber

INR 100 per share

0.01%

Each of the outstanding CCPS shall automatically and mandatorily be

converted into equity shares on the Mandatory Conversion Date.

“Mandatory Conversion Date” means the earlier of or (i) the date falling on the

10th anniversary of the issuance of CCPS; or (ii) the date on which the CCPS

are required by Applicable Law to be mandatorily converted into equity

shares.

10 (Ten) equity shares of Rs. 10 (Indian Rupees Ten) each against 1 (One)

CCPS of Rs. 100 (Indian Rupees One Hundred) each.

Face Value

Dividend Rate

Conversion Time

Conversion Ratio

Key Terms of CCPS:

Bharti Airtel Limited, has become a

conglomerate having portfolio ranging

from physical assets including tower

infrastructure, telecommunication

business and new age digital business

and having vale added digital services.

Telecom Business risks and returns

and type of investors who could be

interested are quite different as

compared to other businesses. It

needs large funds for paying past

revenue sharing dues to be paid to

government as per the Honorable

Supreme Court decision and to

acquire spectrum for 5G rollout for its

customers.

For BAL, it is difficult to raise huge

funds at holding company level

because of present debt equity ratio,

cash flow and present promoters'

stake. To raise huge funds required, it

has very few options other than

diluting stake in its Telecommunication

Business. Thus, present scheme is to

facilitate such massive fund raise by

demerging Telecommunication

Business while consolidating Digital

Business into BAL.

One must note that the valuation given to

Reliance Jio was cumulative to its

Telecom Business as well as Digital

Business and in valuation of INR 179,670

c r o r e s i s o n l y p e r t a i n i n g t o

telecommunication business of BAL.

Further, with current structure, BAL will

place its entire digital business with itself

which is currently placed in a subsidiary

while its core business will be placed in

subsidiary. This arrangement could

initially result in change in overall

valuation of BAL on account of holding

company discount while the long-term

valuation will depend on action taken by

BAL post-rejig and entry of strategic

partner and amount infused by them.

Assuming an investor holds 1000 shares

of BAL, the consideration to be received

by him as a result of demerger:

The CCPS issued by Airtel Limited will not

be listed on any exchanges. An exit

mechanism will be provided to all the

CCPS holders for 3 years from the

effective date based on periodic

valuations (with a validity of 6 months) to

be done. Each CCPS holder shall have the

right to tender the CCPS issued to them to

BAL and/or its (direct or indirect) wholly

owned subsidiaries, at any time on or

prior to 3 (three) years from the Effective

Date.

Since CCPS will be unlisted, dividend rate

on CCPS and time taken for conversion,

most of the CCPS holder likely to tender

their shares under Exit Mechanism.

Interestingly, the consideration has been

designed in such a way that CCPS will be

issued only promoters along with other

institutional shareholders and almost

entire holding along with control shall

continue to remain with BAL. Effectively,

BAL has taken its entire Telecom

Business into an unlisted company which

will paw the way for strategic investors

who are waiting to invest only in telecom

business of BAL.

The beneficial interest of shareholders of

BAL will continue to remain same even

after the transaction, till conversion of

CCPS though change will not be

significant.

Exit Mechanism

The structure opted by other Companies

including Reliance Jio may not be optimal

due to recent changes in taxation of

Slump Sale. However, by designing

consideration, this structuring will entail

BAL to achieve its commercial objectives

in a tax neutral way.

any time on or prior to the Effective Date.

BAL will continue to hold entire equity

share capital of Airtel Limited. The

allotment could be considering the

required minimum NetWorth/capital for a

Telecommunication company in India.

Going ahead, with sea changes in

technology space, valuation of digital

business going to be higher as

compared to the asset heavy

infrastructure business. BAL's digital

business is still in nascent stage and

may require further nurturing. Thus, it

seems BAL do not want to put any

value to it at this stage and want all

institutional and public shareholders

and even foreign promotors to get full

economic value out of the same in its

future growth. Indian promoters may

not like to dilute its stake by offering

shares of present listed company.

As unlisted company, the new

structure will involve lessor regulatory

compliances /challenges including

SEBI (Securities and Exchange Board

of India) Takeover Code and ease

introducing both strategic and

financial partner. In future, BAL may or

may not list its telecom business.

The new tax-efficient structure will

enable BAL to dilute substantial stake

in Telecom Business and at a same

time reduce its leverage. Massive

amount of capital expenditure will be

required by BAL to rollout 5G services

in coming days. Considering the

staggering debt, it currently has,

carving out telecom business and

then inviting some strategic partner

looks essential for BAL. The Company

has already announced various

restructuring initiatives like MoU for

the potential sale of its tower assets

in Chad and Gabon to Helios Towers

for USD 108 million; MasterCard

investment of USD 100 million in

Mobile Money Africa; USD 200 million

investment in Mobile Money by TPG's

Rise Fund; and Sale of spectrum in

800 MHz to RJio to reduce its debt by

monetising its asset.Most of the

funds infused by strategic investor in

future likely to be used for expansion

while BAL may also seek to reduce

some of the debt it will have after

demerger.




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May 2021 150/-

Airtel Rejig: Value

Creation or

Compulsion?



DEMERGERSolara Becomes Bigger





Into Mergers and Acquisitions

May 2021 150/-

Airtel Rejig: Value

Creation or

Compulsion?










Nashik-basedYork Winery tomerge withSula Vineyards

York Winery will soon merge with Sula Vineyards and

become a wholly-owned subsidiary of Sula.

Sula, the largest Indian winery, enjoys over a 65% market

and has been the biggest in India in terms of wine

tourism, attracting nearly four lakh wine tourists every

year, including over 15,000 visitors to the two-day annual

“Sula will be able to expand our hospitality operations

across the road to our neighbour York, thus boosting

Nashik's wine tourism offerings. And there are synergies

to be had from combining some operations. Consumers

benefit from seeing more York brands on more shelves

across the country, expanding consumer choice. It's a

great fit overall,” Samant said.

Located barely a mile away from Sula Vineyards, York

Winery — which made Chandon sparkling wines for Moet

and Chandon for three years as a contract facility — was

established in 2006. It occupies nine acres of vineyards

overlooking the Gangapur Dam. The family-owned

winery focuses on producing fruity and dry rather than

sweet wines. Products of Turning Point, Good Earth, a

couple of wineries from Karnataka, a few exclusive

barrels from Connoisseurs of Mumbai, and some

exported labels have been crafted at the winery.

The York Winery label rights have been sold to Sula.

Rajeev Samant, the founder CEO of Sula Vineyards, said

the merger is a triple win — for York, Sula and wine

consumers. “Smaller wineries find it very difficult to get

distribution, and the pandemic has been a big blow. Sula

will help York get a wider distribution and continue the

great winemaking tradition of the Gurnani family with

Kapil Gurnani continuing as winemaker and brand

ambassador,” he said.

SulaFest. When the lockdown was eased earlier this year,

Sula Vineyards had reported 95% occupancy at its 51-

room resort.

The deal will also mean Sula can use York's facility, which

has a tasting room and restaurant, for wine tourism.

York currently makes around 36,000 cases of red, white

and sparkling wines annually. n Blanc. The winery has a

production capacity of 400,000 litres.

NATIONAL NEWS

M&A


JSPL sells entire stakein Jindal Power toWorldone for ₹3,015 crore

The Board of Jindal Steel and Power Limited approved

the divestment of its entire equity stake in Jindal Power

Limited by selling its shares to Worldone Private. The

deal was finalised at an all-cash transaction of ₹3,015

crore for 96.42% stake, the JSPL informed in a regulatory

filing on Tuesday.

The proposed sale is subject to the necessary approvals

of the concerned parties.

The Worldone was selected by way of an elaborate

bidding process run by Grant Thornton Advisory

wherein the Acquirer submitted the highest binding bid

on acceptable terms and conditions.

The long stop date for completion of the proposed sale is

12 months which may be mutually extended by the

parties.


The cash-and-stock deal valuing Cleartrip at almost $40

million. The deal comes at a time the hospitality industry

continues to reel from the onslaught of the coronavirus

pandemic.

Flipkart introduced travel bookings in 2018 through a

partnership with MakeMyTrip and switched to Ixigo the

next year.

“The travel and hospitality industry has been severely

affected by the impact of covid-19, with travel booking

platforms unable to get back on their feet," one of the

three people cited above said. “The Cleartrip acquisition

allows Flipkart to now have a direct play in the travel and

hospitality segment, which it offered earlier through

partnerships. The acquisition may also allow Flipkart to

cross-sell financial services and products like insurance

and payments for travel bookings through Cleartrip," the

person added.

Flipkart Group is close to buying travel and hotel

booking platform Cleartrip in a distress sale, three people

aware of the matter said, as the Walmart-owned e-

commerce giant strengthens its operations in the

hospitality segment.

In September 2020, Flipkart tied up with Liberty General

Insurance to provide travel insurance for flights booked

“The deal is in its final stages; there could be a change in

management by the end of this month. They were trying

for an exit for some time now because after SAP acquired

Concur, the focus moved away from travel," one of the

people cited above said.

Cleartrip last raised an undisclosed amount from Concur

Technologies and Gund Investments in 2016, taking its

total fund-raise to $75 million.

The company acquired Saudi Arabian travel startup

Flyin in 2018 to expand in West Asia.

In November 2020, Flipkart acquired augmented reality

company Scapic to build immersive shopping

experiences. The same month, it acquired Mech Mocha

to scale its gaming business.

on its platform.

Flipkart has also picked up stakes in offline brands,

including Aditya Birla Fashion and Retail Ltd; Arvind

Youth Brands and Wrogn-owner Universal Sportsbiz Pvt.

Ltd to expand the choice on its platform and establish an

offline-retail presence.

German enterprise software major SAP acquired Concur

Technologies for approximately $8.3 billion in 2014.

NATIONAL NEWS

M&A


Flipkart to acquiretroubled Cleartrip



NATIONAL NEWS

M&A


30

While Den's OFS was fully subscribed, Hathway's was

partially subscribed. Promoter holding in Den before the

OFS stood at 86.53 per cent, while in Hathway it stood at

94.1 per cent. The floor price of the Hathway and Den

share sales was pegged at Rs 25.3 and Rs 48.5,

respectively.

Den Networks, a cable distribution company owned by

RIL, said that it had decided against proceeding with the

composite scheme of arrangement in which it was to

merge into Network18 along with its sister concerns.

“Considering that more than a year has passed from the

time the board considered the scheme, it has decided to

not proceed with the arrangement envisaged in the

scheme,” Den said in a statement to the stock

exchanges.

A year after announcing the merger of Den Networks,

TV18 Broadcast, and Hathway Cable & Datacom into

Network18 Media, Mukesh Ambani-led Reliance

Industries (RIL) called off the transaction.

The development comes within a month of an offer for

sale (OFS) launched by RIL to pare its stakes in Den and

Hathway. RIL subsidiaries were looking to offload 19.1 per

cent in Hathway and 11.63 per cent in Den for Rs 853 crore

and Rs 269 crore, respectively.


Merger of Tv18Broadcast,Hathway, DenNetworks intoNetwork18 called off

Mobile Premier League acquires Gaming Monk;launches Esports Arena

Esports and skill gaming platform Mobile Premier

League (MPL) on Tuesday said it has acquired esports

gaming platform GamingMonk for an undisclosed

amount. GamingMonk hosts esports tournaments

across multiple platforms including PC, consoles and

mobile phones. It serves as a launchpad for publishers

and a community for gamers creating an integrated

ecosystem across esports, live streaming, and content

discovery.

As part of the transaction, MPL has absorbed the entire

GamingMonk team. This acquisition will allow MPL

accelerate, bringing to market key national, regional and

global tournament IPs and allow it to develop a full suite

of esports and broadcasting capabilities.

“GamingMonk will augment our efforts in reaching our

target audience and engage with our users effectively.

With the increased consumption of esports in the last

couple of years and it becoming as competitive as any

other sport, it gives us immense pleasure to present our

users with the best of games to play, and enjoy their

passion for gaming," said Sai Srinivas, Co-founder and

CEO, MPL.

With Esports Arena, MPL aims to take esports to the

masses, with gaming titles that are smartphone friendly.

MPL has also launched Esports Arena, the banner under

which the platform will host fortnightly esports

tournaments in some of its marquee games such as

chess, WCC, pool, etc. Each of these tournaments will

carry a cash prize of Rs10 lakh and entry is free for all

gamers. MPL will also stream the games on its social

media platforms.

“I strongly believe that our collaboration with MPL will not

only help us accomplish our goal, but also transform the

way every individual in our country views esports. MPL

has been one of the pioneers in changing the gaming

NATIONAL NEWS

M&A


culture in Asia, and it was a no brainer for us that if there

was someone who could help us reach our goal at the

earliest it had to be them," said Ashwin Haryani, co-

founder, GamingMonk.

Reliance Communicationheaded for liquidation afterNCLAT judgment

UVARCL is also the successful bidder for assets of RCom

and Reliance Telecom (RTL), which primarily include

spectrum and real estate.

The NCLAT, in its judgment last week, had held that

spectrum could not be treated as 'security interest' by

lenders. However, the tribunal held that the government

was an operational creditor. In the matter of

'Ghanashyam Mishra and Sons Private Ltd vs Edelweiss

Asset Reconstruction Company Ltd', the Supreme Court

had held that operational creditors could not claim any

amount over and above the resolution plan as approved

by the CoC.

It is clear that the DoT, as an operational creditor, cannot

recover any adjusted gross revenue (AGR) dues ahead

of financial creditors. Aircel and RCom owe Rs 12,389

crore and Rs 26,000 crore, respectively, to the DoT in

AGR dues.

The resolution plan of RCom and RTL was duly cleared by

100 per cent of lenders, and is awaiting approval of the

NCLT, Mumbai, since March 2020.

Liquidation of RCom and RTL will result in a loss of Rs

40,000 crore to 38 lenders. Chinese banks led by China

Development Bank will lose Rs 9,000 crore, while SBI

stands to lose Rs 3,000 crore and Life Insurance

Corporation of India stands to lose Rs 3,700 crore. The

banks, which have not received a single penny from

RCom since June 2017, are now looking at clarity from the

apex court.

“A similar fate awaits RCom, which was sent to the NCLT

for debt resolution after it defaulted on Rs 46,000 crore

of debt,” said a banker.

Following the NCLAT's judgment, experts said the

resolution plan of UV Asset Reconstruction Company

(UVARCL) for Aircel, which was approved in June 2020,

would be unworkable and the company would be

heading for liquidation, thus resulting in zero recovery

out of the Rs 18,000 crore owed to lenders.

Anil Ambani-promoted Reliance Communications

(RCom), which is now bankrupt, will now undergo

liquidation unless the Supreme Court overturns the

National Company Law Appellate Tribunal (NCLAT)

order.

The order states that spectrum owned by the firm can

be sold under the insolvency process after government

dues are cleared.

A banking source said the committee of creditors (CoC)

for RCom will file an appeal against the order. The NCLAT

had passed the order in the 'Aircel versus the

Department of Telecommunications (DoT)' legal fracas.


NATIONAL NEWS

M&A


32

OneWeb is a low earth orbit (LEO) satellite

communications operator, co-owned by Bharti Global

and the UK government, which is open to entering India

either directly or through a commercial partnership,

involving either the JV route or a bandwidth capacity

leasing pact, even as it gears up to launch fast

broadband services in the country by June 2022.

Nettle Infrastructure Investments, a wholly-owned

arm of Bharti Airtel, has acquired 100% stake in OneWeb

India Communications Pvt Ltd, in an all-cash deal for an

undisclosed sum.

“Nettle Infrastructure Investments has acquired 10,000

shares in OneWeb India Communications for a cash

consideration, amounting to 100% control,” Bharti Airtel

said in a regulatory filing Wednesday evening.

Bharti Airtel's exchange filing on Wednesday added that

“UK-based Network Access Associates Ltd, a OneWeb

group company, is in the process of seeking foreign

direct investment (FDI) approval for investment in

OneWeb India Communications Private Ltd”.

Company insiders, though, said this is likely to happen

only once clarity emerges around the FDI norms in the

upcoming revised satellite communications policy.

OneWeb recently launched 36 satellites by Arianespace

from the Vostochny cosmodrome in Russia, paving the

way for launching high-speed satellite broadband

services in key global markets from late-2021, and in

India by mid-2022.


Payment provider to small and medium enterprises,

Instamojo, announced that it has acqui-hired Bengaluru-

based virtual theatre and vernacular content platform,

Showman.

The acquisition will help Instamojo strengthen its

product and research team. With the acquihire, founders

of Showman -Kshitij Bhatawdekar and Rutveez Roopam

Rout will join the Instamojo team.

“The acqu-ihire of Showman is a first for Instamojo and

comes at a time when we as a company are evolving to

move to the next level. This acquihire will help Instamojo

strengthen its product and tech prowess as we continue

to innovate across multiple categories and achieve our

vision of being the most trusted platform for MSMEs to

start their business online," said Akash Gehani, co-

founder and chief operating officer, Instamojo.

In November, last year, Instamojo had raised an

undisclosed amount as a part of its pre-Series C bridge

round from Japanese investors Base and Gunosy

Capital. Prior to that the company had closed its Series B

funding round of ₹50 crore ($7 million) led by Japanese

payments firm AnyPay, back in 2019.

Two-year-old Showman operates a virtual theatre that

enables users to buy movie tickets online and watch it

from the comfort of their homes.

“As an entertainment-focused platform, we have deep

insights into the users of India. When we spoke to

Instamojo, we realized our insights can drive real impact

for the MSME space of India. Both Rutveez and I are

excited and looking forward to beginning this new phase

of our journey with Instamojo," said Kshitij Bhatawdekar,

co-founder, Showman.

Bharti Airtel unitNettle acquires100% stake inOneWeb India

Instamojoacquihiresentertainmentstartup Showman


INTERNATIONAL NEWSINTERNATIONAL NEWS

M&A


Super Group, the parent company of online

bookmaker Betway, said it has agreed to go public

through a merger with blank-check acquisition firm

Sports Entertainment Acquisition Corp at a valuation of

around $5 billion.

The deal comes as Betway, which has its roots in Europe,

expands in the United States. Betway also said it has

agreed to acquire Digital Gaming Corp, tapping the online

sports betting and gaming market in 10 U.S. states.

"The company (Super Group) is projecting EBITDA in

excess of $350 million in 2021, with continuous growth

that is very healthy thereafter," Sports Entertainment

Chairman Eric Grubman said in an interview. "Those

numbers are without the U.S., which is not likely to

produce high profits in the next couple of years. The U.S.

currently is more about the investment than profit, and is

one of many opportunities the company has."

Upon closing of the deal, which is dependant on a vote by

Sports Entertainment shareholders, the combined

company's stock would trade under the symbol "SGHC"

on the New York Stock Exchange.

The merger values Super Group at $4.75 billion, not

accounting for funds it will receive from Sports

Entertainment in the deal. Sports Entertainment

currently has around $450 million in trust. Its

shareholders can either roll over their shares into the

combined company or redeem the stock and get their

money back.

Special purpose acquisition companies (SPACs) such as

Sports Entertainment are shell companies that raise

funds in an initial public offering with the aim of merging

with a private company, which becomes public as result,

providing an alternative to traditional IPOs.

Sports Entertainment Acquisition completed its IPO in

New York in October. It is backed by Timothy Goodell,

general counsel of U.S. oil producer Hess Corp and

brother of NFL commissioner Roger Goodell, and an

affiliate of investment bank PJT Partners Inc.

"We have our own software and software from third

parties, on which we overlay our data analytics engine.

Data has been at the core of our DNA," Super Group Chief

Executive Neal Menashe said. "It's all about return on

investment, return on marketing spend, and engaging

customers in an entertainment environment in a safe,

secure and responsible way."

Super Group has partnerships with National Basketball

Association teams such as the Chicago Bulls, Golden

State Warriors, Brooklyn Nets and Los Angeles Clippers,

and English football teams such as West Ham United.

SPAC dealmaking tailed off in recent weeks following a

record start to 2021 as U.S. regulators changed the

accounting requirements for them and investors have

been less willing to bankroll mergers.

Betway's platform enables betting on popular sporting

events around the world, including Britain's Premier

League football tournament and the cricket tournament

Indian Premier League.

Online bookmakerBetway parent to gopublic in mergerwith acquisition firm

34


M&A


"This is the first step of establishing and bringing

together the people. Obviously building technology and

product requires people, and that's much what this

acquisition is about," Woven Planet chief executive

James Kuffner told reporters on Tuesday.

It has also been working closely with ride-hailing firms

and owns a stake in top Chinese firm Didi Chuxing and

Southeast Asia's Grab. It had a stake in the self-driving

It will also give Toyota a direct presence in Silicon Valley

and London and expand smart-city project "Woven City"

at the base of Japan's Mt. Fuji, effectively helping it ride

through dramatic changes expected in the mobility

industry and major centres, he said.

Toyota, which currently offers Level 2 automation with

advanced driver assistance technology, has other self-

driving projects including a joint venture with SoftBank

Corp and is forming a consortium with General Motors

Co, suppliers and semiconductor companies.

The acquisition of Level 5 automation will also provide

Toyota access to the U.S. ride-hailing firm's more than

300 employees of the essentially complete autonomy

technology.

Toyota Motor Corp will acquire Lyft Inc's self-driving

technology unit for $550 million, the companies said, as

the Japanese firm steps up its automation ambitions

with the newly created Woven Planet division.

For Lyft, the deal will allow it to become profitable sooner

and takes away the burden and risk of developing a

costly technology that has yet to enter the mainstream.

unit of Lyft's larger rival Uber Technology Inc, but

transferred the stake when Uber sold the unit in

December to car startup Aurora.

The Japanese carmaker will likely make more deals, even

if they do not ultimately lead to self-driving vehicles to

"actively gather software and people who have

knowledge", said Seiji Sugiura, senior analyst at Tokai

Tokyo Research Institute.

Toyota said in February it would develop and build

autonomous minivans for ride-hailing networks with

Aurora and longtime supplier partner Denso Corp.

Lyft's sale allows it to offload cash-burning side

businesses and focus on reviving their core divisions

following a bruising pandemic year.

It will receive $200 million cash upfront, with the

remaining $350 million paid over five years.

Lyft did not immediately say how it plans to invest the

funds. But the sale will allow Lyft to report third-quarter

profit on an adjusted basis of earnings before interest,

taxes, depreciation and amortization as long as the

company continues to recover from the coronavirus

pandemic, it said.

The sale will also remove $100 million in annual net

operating costs, Lyft said.

Lyft will now focus on what it can do best with

autonomous vehicles by offering services such as

routing, consumer interface and managing, and

maintaining and cleaning partners' autonomous vehicle

fleets, which could mean added revenue, it said.

Lyft already allows consumers to book rides in self-


Toyota to buy Lyftunit in boost toself-driving plans


M&A


It will continue to collect real-world driving data through

some 10,000 vehicles it rents out to consumers and ride-

hail drivers. The data is valuable for the development of

self-driving vehicles that Woven Planet will have access

to under the deal.

But Lyft also believes human ride-hail drivers will remain

important for the foreseeable future to serve customers

during peak demand periods, bad weather, or in areas

that self-driving cars are unable to navigate.

driving vehicles in select cities in partnerships with

Alphabet Inc's Waymo and Motional, the joint venture

between Hyundai Motor Co and Aptiv.

A secular shift involving how technology is used to

package, manage and distribute property assets, in this

case office space, is occurring, Marcus Moufarrige,

founder of software firm Ility, an operating system for

commercial real estate, said of the Equiem deal.

It follows Boston-based HqO, a tenant experience

operating system, which two weeks ago raised $60

million to expand its operations. Real estate software

and data firm View The Space Inc in March bought Rise

Buildings, another tenant experience operator, for about

$100 million, the Wall Street Journal said, citing sources.

New York Community Bancorp Inc agreed to buy

Flagstar Bancorp Inc for $2.6 billion in an all-stock deal, as

U.S. regional banks look to consolidate to compete better

against larger lenders in a low-interest-rate

environment.

As part of the deal, New York Community shareholders

will own about 68% of the combined company after the

transaction closes, while Flagstar shareholders will own

the rest, the banks said.

Piper Sandler and Goldman Sachs served as financial

advisors to New York Community, while Morgan Stanley

and Jefferies acted as financial advisors to Flagstar.

Last year, regional lender First Citizens BancShares Inc

said it would acquire peer CIT Group Inc for $2.2 billion,

while PNC Financial Services agreed to buy the U.S.

business of Spain's BBVA for $11.6 billion.

The ultra-low interest rate environment hurts regional

banks more as they rely on interest income from loans

and do not have big investment banking and trading

arms like large Wall Street lenders.

Brazil's Soma in talksto acquire Cia Heringfor $967 million

is a major, diversified clothing designer and retailer

present mainly in Brazil.

Brazilian apparel retailer Grupo de Moda Soma is in

exclusive talks to acquire Cia Hering for 5.3 billion reais

($967 million) in a cash and share deal, according to

securities filings by both companies.

The acquisition will involve a cash payment to Hering

shareholders of 9.630957 reais per share, plus 1.625107

share of Grupo Soma, the filing said, for a total value of

32.54 reais per share.

Soma, which owns apparel brands such as Farm, Animale

and Maria Filo, said that, if successful, the deal will help it

build a bigger retail platform and create unspecified cost

synergies.

New YorkCommunity Bancorp

to buy FlagstarBancorp

for $2.6 billion



M&A


Asian private equity firm ADV Partners and Premji

Invest have acquired a significant majority stake in

leading plastic molding company Micro Plastics for

around $70 million.

The funds would be used for the company's expansion

plans and the development of new manufacturing

facilities to cater to increasing demand. Though the

company has not officially specified investment details,

sources told ET that both Premji and ADV together

invested $70 million to take control of the company.

MPPL is the market leader in contract manufacturing of

toys in India for leading global brands such as Hasbro

and Mattel. The company's manufacturing facilities

feature state-of-the-art injection moulding machines, an

in-house tool room, mold design, press shop, assembly

lines, quality testing lab, and decoration facilities.

Headquartered in Bangalore, Micro Plastics has five

manufacturing facilities in and around the city. The

company offers designing to shipping final products for

diverse industries ranging from toys and model hobby

kits to sports equipment, its website showed.

“The toy sector in India holds lot of potential both on the

export and domestic fronts. We also look forward to

broadening our footprint in consumer goods, healthcare,

and sports among other sectors,” said Micro Plastics

founder and managing director, Vijendra Babu.

“ADV Partners' investment in Micro Plastics is a

continuation of our efforts to back Indian entrepreneurs

who have established market leadership in specific

manufacturing segments in India while contributing to

the Indian government's long-term 'Atmanirbhar' (self-

reliance) vision,” said Suresh Prabhala, co-founder and

managing partner at ADV Partners.

Leading investment firm Blackstone announced to

acquire a controlling stake in IT services firm Mphasis for

up to $2.8 billion.

"We believe Blackstone's sustained strategic partnership

will help the company accelerate its growth and scale

new heights. Sovereign and pension funds co-investing

is a testimony of long-term commitment and a vote of

confidence of a marquee set of shareholders," said Nitin

Rakesh, CEO and Executive Director of Mphasis.

Based on the open offer subscription, the blended

purchase price will vary between Rs 1,452 to Rs 1,497 per

share and the purchase consideration will vary between

Rs 152 billion to Rs 210 billion (approximately $2 billion to

$2.8 billion), Blackstone said in a statement.

Specialising in Cloud and digital solutions, Mphasis has

deep domain expertise in the banking, financial services

and insurance (BFSI) sector and serves 35 of the top 50

US BFSI firms.

A wholly-owned subsidiary of the Abu Dhabi Investment

Authority (ADIA), UC Investments and other long-term

investors will co-invest along with Blackstone.

"Mphasis is backed by strong secular tailwinds as global

enterprises increasingly migrate to the cloud. The

company is exceptionally well-positioned given a terrific

management team, strong order backlog, long-term

strategic customer base, deep domain expertise in

financial services, and a world-class suite of cloud and

digital offerings," said Amit Dixit, Co-Head of Asia

Acquisitions and Head of India for Blackstone Private

Equity.

The deal is expected to be completed in the coming

months, subject to customary closing conditions and

regulatory approvals.


ADV Partners,Premji Invest acquirecontrolling stake inMicro Plasticsfor $70 million

Blackstone to buycontrolling

stake in Mphasisfor up to $2.8 billion




M&A


“The paper packaging market is expected to

demonstrate strong growth over the next five years,

driven by underlying expansion in consumer end

markets, further bolstered by secular tailwinds of

sustainability and premiumization," said Vishal

Mahadevia, managing director and head of India at

Warburg Pincus.

The company recorded revenue of around ₹1,000 crore

last fiscal, he added. Parksons revenues have grown at a

compound annual growth rate of 15.5% over the last five

fiscals through FY20 while maintaining a healthy double-

digit operating margin, rating agency Crisil Ltd said in a

September report.

PE firm Blackstone acquired glass packaging major

Piramal Glass in December for close to $1 billion. It had

earlier acquired a 75% stake in Essel Propack in 2019 for

$470 million.

As part of the transaction, existing PE investors Kedaara

Capital AIF 1 and Olza Holdings Ltd and IIFL have fully

exited their investment in Parksons and the promoter

Kejriwal family has sold a partial stake, Warburg said.

Family members Ramesh Kejriwal, Siddharth Kejriwal

and Chaitanya Kejriwal will continue to retain their

current positions of chairman, managing director and

joint managing director, respectively, and will drive the

business going forward, it added.

The deal highlights a growing PE interest in packaging

businesses in India driven by rising demand for

packaging of household, medical, edible and lifestyle

products in Asia's third-largest economy.

American private equity (PE) firm Warburg Pincus

said its affiliate Green Fin Investments BV has acquired a

majority stake in Parksons Packaging Ltd, it said in a

statement.

Parksons claims to be India's largest independent folding

carton manufacturer with a diversified product portfolio

and over 300 customers across consumer, food,

pharmaceutical and other end-markets.

Through its six manufacturing facilities across India,

Parksons has the capacity to convert more than 125,000

million metric tonnes of paperboard annually.

Reliance all set to buy iconicBritish Country Club StokePark for 60 mn pounds

After Singapore and Dubai, the UK and especially London

has been the chosen outpost of several well heeled

Indians like Sunil Mittal, the Hinduja family, Lakhshmi

Mittal, Analjit Singh, Anil Agarwal, Ajay Piramal among

several others. Even the Ambani family spent the

summer of 2020 at Heckfield Place, a famous Georgian

family home in Hampshire, restored from its classical

origins to a luxury hotel over 400 acres, with a posse of

family and friends.

The King family has been looking to sell this 49 bedroom

marque property for the last several years and had even

mandated CBRE in 2018 to bring the property to the

market having explored the possibility of a sale two

years prior.

Reliance Industries, through an international arm, is

finalising the acquisition of Stoke Park, Britain's first

County Club, from the International Group (IG), owned by

the King family, a second-generation UK family business,

for around 60 million pounds (Rs 600 cr), they add.

Originally designed by Capability Brown and Humphry


Warburg acquirescontrolling stake inParksons Packaging


M&A


Repton, it was initially built as a private home by George

III's architect James Wyatt between 1790 and 1813. Since

then it has become a popular movie location -- Tomorrow

Never Dies, Layer Cake, Bridget Jones Diary and

celebrity concert venue where Elton John performed

outdoors in 2014, for a charity concert for SportsAid,

patronised by the Duchess of Cambridge, and raised

$1.24 million It also hosts the annual Boodles Tennis

Championships as a warm-up to Wimbledon, a week prior

to the Championships.

The King family is currently manned by brothers

Hertford (54), Witney (53), and Chester (49) after their

father Roger King, a maverick dealmaker, who set it up in

the UK in 1964. After starting out as a jeweller, he went to

become the worldwide distributor for the Soviet Union's

polished diamonds. Following his close proximity to Sheik

Suroor bin Mohammed Al Nahyan, a member of the Abu

Dhabi Royal family, on account of real estate deals, King

diversified into running hospitals in Abu Dhabi and Saudi

Arabia in the late 1970s.

Goldman Sachs' investment banking division advised

Good Host on the transaction. The startup was founded

by Nimesh Grover and Stanley D'britto in September

2017. It operates around 18,000 beds across campuses

of educational institutes, such as Manipal University, O.P.

Jindal Global University and Shoolini University. The

company said it is in talks with other prestigious

institutes to expand its portfolio to 50,000 beds in the

near-term.

“…Good Host is confident that with Goldman Sachs and

Warburg Pincus as shareholders, our company will

further strengthen its leadership position in this space

and bring many more partner universities and students

onto our platform by providing contemporary student

housing to live, learn and grow in a safe environment,"

said Nimesh Grover, chief executive, Good Host.

Following the transaction, Baskin Lake, which now holds

a significant stake in the company, along with Goldman

Sachs will support Good Host's growth by investing

additional capital. Goldman Sachs continues to be a

majority shareholder in the startup.


Warburg Pincusbuys HDFC's stake instudent hostel company

Baskin Lake Investment Ltd, an affiliate of Warburg

Pincus, has acquired HDFC Ltd's 24.48% stake in

Goldman Sachs-backed student housing startup Good

Host Spaces for ₹216.18 crore.



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