s subramanian
Post on 12-Jul-2015
103 Views
Preview:
TRANSCRIPT
Strictly Private & Confidential
Restructuring for Value EnhancementNovember 2008
Presented By:
S. Subramanian Ph.D.Head of Investment Banking,
ENAM Securities Pvt. Ltd.
Strictly Private & Confidential 2
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 33
Multiple Champion Teams = India’s Leading Investment Bank
Source : Prime database, Index of Performance Rankings
Investment Bank
Corporate Finance
M&A
Private Equity
Institutional Sales
Broking
Retail
Distribution
Enam Direct
Insurance Broking
AMC
Wealth Management
Advisory
Proprietary Investments
Treasury
Private Equity
Research
“Pioneers of equity research in India” (Business India) Wide global distribution; read by over 700 institutions around the world Broad coverage (150+ companies, All the key sectors) Publish over 300 reports annually
Outperformed all key indices every year in the last 7 years
Delivered 28.3% CAGR return since inception (BSE Index 17.2%)
Only service provider in India to achieve this track record
Opinion maker across multiple investment approaches (Emerging, Value, Growth, Event-Linked)
No 1 position in Retail & HNI equity distribution with nearly 26% market share and consistent rank for several years
Unparalleled reach in the domestic primary market over 2,50,000 retail investors through 3,000 active sub brokers, spanning 170 towns/cities in India
Highest QIB mobilizer in 2005, 2006, 2007 and 2008 Services all key institutional investors around the world Ranked #1 Domestic Brokerage by Asset Asian Equities
Benchmark Survey (in ’04 and ’05) Ranked #1 Domestic Brokerage House by AsiaMoney polls Strong relations with global and domestic institutions
Award Winning Investment Bank (AsiaMoney, FinaceAsia, OutlookMoney)
Trusted advisors to some of India’s most admired business
Ranked No 1 on the Equity Offering League Table for FY08 (Source: Primedatabase)
M&A and Advisory Team gaining momentum
Strictly Private & Confidential 44
Enam : At the Vanguard of India’s Evolution
1980sPre-LiberalisationEra of Import-Substitution
1990sEra of ServicesBrains & Brands
Late 1990s - Early 2000sEra of Restructuring andPrivatization
Mid 2000sEra of Consumerism, Infrastructure, Realty … Growth
Enam is early to spot fundamental trends, anticipate and service client needs and benefit from it
Strictly Private & Confidential 5
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 6
Introduction
Corporate restructuring encompasses two distinct groups of activities;
Business Restructuring: Expansions – including mergers and consolidations, tender offers, joint ventures, and
acquisitions; Contraction – including sell offs, spin offs, equity carve outs, abandonment of assets, and
liquidation.
Financial Restructuring: Value Re-engineering - Subsidiarisation, De-subsidiarisation. Ownership and control – including the market for corporate control, stock repurchases
program, exchange offers and going private;
Strictly Private & Confidential 7
Does Restructuring create value?
The key principle behind corporate restructuring is to create shareholder value over and above that of the sum of the parts.
Corporate Restructuring creates value only if:
Value of the combined entity as a result of the corporate restructuring is greater than the sum of value of individual companies.
C > A + B Value creation
C<= A + B Value destruction
Strictly Private & Confidential 8
Value Creation through listing of distinct businesses
Objective To list the shares of subsidiary company through allotment of shares of subsidiary company to the shareholders of parent
company pursuant to a scheme of arrangement.
Stake held
Issue of consideration
X Co. (Parent)
Shareholders
Y Co. (Subsidiary)
100%
Listed
Unlisted
X Co. (Parent)
Shareholders
Y Co. (Subsidiary)
Listed
Listed
Distribution of shares of Y Co.
to the shareholders of X Co. pursuant to a scheme of arrangement
Single Business Entity
X Co. (Parent)
Shareholders
100%
Listed
X Co. (Parent)
Shareholders
Listed
Distribution of shares of A, B, & C Co. to the shareholders of X Co. pursuant to a scheme of arrangement
Multiple Business Entity
A Co. (Subsidiary)Tea business
Unlisted
B Co. (Subsidiary)
Steel Business
C Co. (Subsidiary)
Telecom Business
Unlisted Unlisted
A Co. (Subsidiary)Tea business
Listed
B Co. (Subsidiary)
Steel Business
C Co. (Subsidiary)
Telecom Business
Listed Listed
100% 100%
Strictly Private & Confidential 9
Alternative Routes
Formation of a special purpose company (SPV) – A 100% subsidiary of parent company Transfer investments (shares of Y Co.) from parent company to SPV pursuant to a scheme of arrangement and get shares of SPV
listed Alternative 1A - Merge SPV into Y Co. at a later point in time and get Y Co. shares listed or Alternative 1B – Merge Y Co. into the
SPV at a later point in time, to be decided depending on tax and cost efficiency. Alternative 2 –Let only SPV remain listed without any merger. Alternative1 is preferred purely from an administrative convenience rather than from a shareholder value perspective.
Formation of SPV Transfer of Investments to SPV*
Parent Co
SPV
Shareholders
Listed
Listed
Y Co
Issue of Shares in Consideration
Transfer of investment
Parent Co
SPV
Shareholders
Listed
Alternative 1A
Y Co
Listed
Parent Co
SPV
Shareholders
Listed
Alternative 1B
Y Co
Listed
Unlisted
Issue of Shares in Consideration
Parent Co
SPV
Shareholders
Listed
Unlisted
Y Co
Unlisted
- Merge SPV into Y Co, and get Y Co. shares listed
- As consideration Y Co issues shares to shareholders of SPV i.e. Parent Co and its shareholders
- Merge Y Co, into SPV
- Investment of SPV in Y Co will get cancelled. No further shares will be issued
100%100%
*Structure under Alternative 2 shall be similar
SPV to merge into Y Co.
Y Co. to merge into SPV
Alternative 1
Strictly Private & Confidential 10
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 11
Case Study - Nicholas Piramal India Ltd
NPIL
GGPL
Scheme of Arrangement between Nicholas Piramal India Ltd. (NPIL) and Kojam Fininvest Ltd. (KFL) for transfer of 53.76% stake of Gujarat Glass Private Ltd. (GGPL) held by NPIL to KFL
Appointed Date – 01st July 2003, Effective Date – 22nd December 2003
Shareholders
53.76%
Listed
Unlisted
Prior to Scheme of Arrangement
NPIL
GGPL
Shareholders
53.76%
Listed
Unlisted
Prior to the Appointed Date
KFL
Unlisted
100%
KFL was incorporated on 30th June 2003 with a paid up capital of Rs. 5 Lakhs as a wholly owned subsidiary of NPIL
NPIL
GGPL
Shareholders
53.76%
Listed
Unlisted
Pursuant to a Scheme of Arrangement
KFL
Listed
0.5%
NPIL transferred its stake in GGPL to KFL pursuant to a scheme of arrangement at book value
KFL issued its shares to the shareholders of NPIL in the ratio of 1: 4 as consideration of such transfer and got listed
Issue of Shares in Consideration
NPIL
GGL*
Shareholders
Listed
KFL Merged into GGL in 2007
KFL was merged into GGL in 2007 pursuant to a scheme of Amalgamation
The shares of GGL held by KFL were cancelled pursuant to such amalgamation
GGL issued its shares to the shareholders of KFL in the ratio of 1:1
GGL shares were listed in February 2008
0.28%
Listed
*The company was converted into a public ltd. company in March 2007
Strictly Private & Confidential 12
Case Study - Nicholas Piramal India Ltd
Pre-Demerger
EQ ( In Crs. ) 38
Price-June03 62
Market Cap. 1,177
Sensex 3,793
Post-Demerger
NICHOLAS PIRAMAL
EQ ( In Crs. ) 38
Listing Price 130
Nicholas Piramal - Market Cap. 2,470
Sensex 4,709
KFL
EQ ( In Crs. ) 10
Listing Price 40
Market Cap. 40
Sensex 4,709
Total Market Cap. On Demerger 2510
Incremental Market Cap 1,333
% Wealth Creation 113.3%
Present Market Cap.
Nicholas Piramal @ 235 4,910
GGL @ 68 68
Total 4,978
Sensex (Nov4, 2008) 10,631
Market Cap ( x ) 4.2
Strictly Private & Confidential 13
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 14
ASSETSBuilding at Goa
Shares in Reliance EnergyReliance Power
Hirma Power Pvt LtdJayamkondam Power Pvt LtdRleiance Thermal Energy Pvt
Ltd
LiabilitiesRelated Loans
Reliance Industries Ltd
Coal based energy Undertaking
Reliance Industries Ltd Shareholders
ASSETSBuilding at Bandra (E),
Mumbai
Shares in Reliance Patalganga
Power Ltd
LiabilitiesRelated Loans
ASSETSBuilding in New Delhi
Shares in Reliance Capital
Reliance General InsuranceReliance Life Insurance
LiabilitiesRelated Loans
ASSETSBuilding, Plant & Machinery, Vehicles
and Equipment located at various locations
Receivables for capital leases
Shares in Reliance Communication Infrastructure
Reliance TelecomReliance Infocomm
World Tel holding LtdPreference shares of Reliance
Telecomm
LiabilitiesRelated Loans
Gas based energy Undertaking
Financial Services Undertaking
Telecom Undertaking
Remaining Undertaking
Reliance Energy Ventures Ltd Reliance Natural Resources
Ltd (formerly Global Fuel Management Services Ltd.)
Reliance Capital Ventures Ltd
Reliance CommunicationsVentures Ltd
Petrochemicals, Oil & Gas, Textiles and other business
As per the Scheme of De-merger, business of RIL was segregated into five undertakings as illustrated below. These undertakings were hived off into four subsidiaries. Each of these subsidiaries issued its shares to the shareholders of RIL in the ratio of 1:1
Appointed date – 01st September 2005, Effective date – 21st December 2005, Record date – 25th January 2005
Case Study - Reliance Industries Ltd
Strictly Private & Confidential 15
RIL
RCL
Scheme of Arrangement between Reliance Industries (RIL) and Reliance Capital Ventures Ltd. (RCVL) for demerger of financial services undertaking to RCVL
Scheme of Arrangement between RCVL and Reliance Capital Ltd (RCL) for amalgamation of RCVL with RCL
Demerger Scheme - Appointed Date – 01st September 2005, Effective Date – 21nd December 2005
Shareholders
42.70%
Listed
Listed
Prior to Schemes of Arrangement
RIL
RCL
Shareholders
42.70%
Listed
Listed
Pursuant to Scheme of De-merger
RCVL
Listed
De-merger of Financial Services
Undertaking
- RCVL was incorporated on 3rd September 2004 and the financial services undertaking of RIL was transferred through the scheme of demerger to RCVL
- RCVL issued its shares to the shareholders of RIL in the ratio of 1:1 as consideration of such transfer
- RCVL got listed through the scheme of demerger
Issue of Shares in Consideration
RIL
RCVL
Shareholders
Listed
Pursuant to Scheme of Amalgamation
RCL
- RCVL was merged into RCL in 2006 pursuant to a scheme of Amalgamation
- RCVL shareholding in RCL was cancelled pursuant to such amalgamation
- RCVL shareholders received shares of RCL in the ratio of 5:100
Listed
Issue of Shares in Consideration
Case Study - Reliance Industries Ltd (Contd)
RCVL merged into RCL
Strictly Private & Confidential 16
Case Study - Reliance Industries Ltd (Contd)
• Scheme of Arrangement between Reliance Industries (RIL) and Reliance Natural Resources Ltd. (RNRL) for de-merger of gas based energy undertaking to RNRL
• De-merger Scheme - Appointed Date – 01st September 2005, Effective Date – 21nd December 2005
Prior to Scheme of Arrangement
- RNRL was incorporated on 24th April 2000 with a paid up capital of Rs. 5 Lakhs as a wholly owned subsidiary of RIL
Pursuant to a Scheme of De-merger
- RNRL issued its shares to the shareholders of RIL in the ratio of 1:1 as consideration of such transfer
- RNRL shares were be listed pursuant to such scheme
- RIL Shareholding in RNRL was cancelled pursuant to the scheme
RIL
RNRL
Shareholders
Listed
Listed
Reliance Patalganga Power Ltd
Issue of Shares in Consideration
RIL
RNRL
Shareholders
Listed
RIL
RNRL
Shareholders
Listed
Unlisted
Reliance Patalganga Power Ltd
Unlisted
100% 100%
ListedReliance
Patalganga Power Ltd
Post Scheme of De-merger
100%
Strictly Private & Confidential 17
Case Study - Reliance Industries Ltd (Contd)
Pre-Demerger
RIL
EQ ( In Crs. ) 1,394.15
Price-Jan '06 850
Market Cap. 118,490
Sensex 10,370
RELIANCE CAPITAL
EQ ( In Crs. ) 245.63
Price-Jan '06 450
Market Cap. 9,950
Sensex 10,370
Post-Demerger
RELIANCE Inds.
EQ ( In Crs. ) 1394.2
Listing Price 730
Market Cap. 101,762
Sensex 10,735
RELIANCE COMMUNICATION
EQ ( In Crs. ) 611.5
Listing Price 300
Market Cap. 36,660
Sensex 10,735
RNRL
EQ ( In Crs. ) 611.57
Listing Price 17.5
Market Cap. 2,269
Sensex 10,565
RELIANCE CAPITAL
Listing Price 500
Market Cap. 10,436
Sensex 10,735
Total Market Cap. - Demerger 151,127
Incremental Market Cap. 22,687
% Wealth Creation 19.1%
Present Market Cap.
RIL @1455.20 229,018
RCOM @250 51,704
RNRL @56 9,088
RCAP @740 18,154
Total 307,964
Sensex (Nov4, 2008) 10,631
Market Cap ( x ) - Since Jan'06 2.6
Strictly Private & Confidential 18
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 19
Case Study - Bharat Forge
Bharat Forge – Significant Group Company holdings and non core assets
BF Utilities – All businesses apart from forging business demerged into BF Utilities
Pre-Demerger
EQ ( In Crs. ) 18.83
Price – Aug 01 12
Market Cap. 250
Sensex 2,812
Post-Demerger
BHARAT FORGE
Listing Price 10
Market Cap. 200
Sensex 3,279
BF UTILITIES LTD
Listing Price 18
Market Cap. 54
Sensex 3,279
Total Market Cap.- Demerger 254
Incremental Market Cap. 4
% Wealth Creation 2%
Present Market Cap.
BHARAT FORGE @ 110 2,417
BF UTILITIES @ 735 2,770
Total 5,187
Sensex (Nov4, 2008) 10,631 Market Cap ( x ) - Since Aug 01 20.7
Strictly Private & Confidential 20
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 21
Some more cases….
Pre-Demerger
EQ ( In Crs. ) 190.34
Price June 06 240
Market Cap. 4,567
Sensex 10,744
Post-Demerger
GE SHIPPING
EQ ( In Crs. ) 152.27
Listing Price 225
GE Shipping - Market Cap. 3424.5
Sensex 13,385
GREAT OFFSHORE
EQ ( In Crs. ) 38.12
Listing Price 730
Market Cap. 2781.3
Sensex 13,385
Total Market Cap. On Demerger 6205.8
Incremental Market Cap Attained 1638.6
% Wealth Creation 35.9%
Present Market Cap.
GE Shipping @ 210 3,212
Great Offshore @ 337 1,253
Total 4,464
Sensex (Nov4, 2008) 10,631
Market Cap ( x ) - Since June ' 06 1.0
GE Shipping GTLPre-Demerger
EQ ( In Crs. ) 85.69
Price -July06 140
Market Cap. 1,198
Sensex 11,699
Post-Demerger
GTL
EQ ( In Crs. ) 85.3
Listing Price 150
Market Cap. 1,280
Sensex 13,137
GTL Infra.
EQ ( In Crs. ) 320
Listing Price 25
Market Cap. 800
Sensex 13,137
Total Market Cap. On Demerger 2079.5
Incremental Market Cap Attained 881.1
% Wealth Creation 73.5%
Present Market Cap.
GTL @ 196 1,855
GTL Infra. @ 38 2,964
Total 4,819
Sensex (Nov4, 2008) 10,631
Market Cap ( x ) - Since July 06 4.0
Pre-DemergerEQ ( In Crs. ) 43.35Price - Dec ' 06 300Market Cap. 12,990 Sensex 14,090
Post-DemergerZEE Entertainment EQ ( In Crs. ) 43.36Listing Price 275Market Cap. 11,924 Sensex 13,362 WWIL EQ ( In Crs. ) 21.72Listing Price 130Market Cap. 2,824 Sensex 13,362 ZEE News EQ ( In Crs. ) 23.98Listing Price 40Market Cap. 959.2Sensex 13,362 DISH TV EQ ( In Crs. ) 42.82Listing Price 110Market Cap. 4710.2Sensex 13,362 Total Market Cap. - on Demerger 20,417 % Wealth Creation 57.2%
Present Market Cap. ZEE Entertainment @ 154 6,684 WWIL @13 273 Zee News @ 40 944 Dish TV @ 18 1,682 Total 9,583 Sensex (Nov4, 2008) 10,631 Market Cap ( x ) - Since Dec.06 0.7
ZEE Telefilms
Strictly Private & Confidential 22
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 23
Case Study - Sterlite
Listing
1993 1996 1997 1998 2000 2001 2003 2007
1993
Rights cum Public Issue
1996
Sterlite Communications IPO Setup as a subsidiary
1997
Merger of Sterlite communications with Sterlite
1998
Indal Hostile takeover bid
2000
Demerger of Sterlite optic from Sterlite
2001
Acquisition of Balco from GoI
2002
2002
Acquisition of HZL from GoI
2003
$1 bn Vedanta Listing
Aug 2007
ADR $2 bn
Strictly Private & Confidential 24
Three Tier Structure
Vedanta
Sterlite
Balco Hind Zinc Sterlite Energy Vedanta Alumina
Copper Mines
Strictly Private & Confidential 25
Creating Value for Promoter
Promoter Holding Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08
Indian Promoters 1.5% 1.5% 0.0% 0.0%
Malco 0.0% 4.6% 7.1% 7.1% 4.7% 4.6% 4.6% 3.61%
Twinstar Holding 35.4% 35.4% 55.1% 60.2% 73.6% 72.3% 72.3% 56.98%
PAC 1.6% 1.6% 4.3% 4.0%
Employee Trust 0.0% 7.4% 11.5% 7.0% 3.2% 3.2% 3.2% 2.51%
Total 38.5% 50.4% 78.1% 78.3% 81.5% 80.0% 80.1% 63.1%
Market Cap (Rs. Crs) 167 228 210 576 1606 4569 26158 50579
Events EWT+ Malco EWT+ Malco+
Buyback
Creeping Rights ADR
Strictly Private & Confidential 26
Agenda
ENAM
About Restructuring
Case Study - Value Creation through listing
Nicholas Piramal India Ltd
Reliance Industries Ltd
TV 18 India Limited
Case Study – Control & Ownership
Sterlite
Bharat Forge
Other Cases
Strictly Private & Confidential 27
Case Study - TV 18 India Limited
Objective
Consolidate their media business which creates a Group structure (and reorganize capital its own capital) that is expected to unlock significant shareholder value.
Pre Scheme Scenario
“CNBC Awaaz” and the general news English Channel – “CNN IBN” were held in promoter entities & legally not part of the listed entity, due to government restrictions
August 22, 2003 News Uplinking Guidelines-
Eligibility criteria for an applicant company desirous of uplinking news and current affairs TV channel(s) from India
It is registered / incorporated in India under the Companies Act, 1956;
Foreign direct investment in the applicant company does not exceed 26% of the total paid up capital *
Indian shareholder to hold at least 51% of the total equity (excluding the equity held by Public Sector Banks and Public Financial Institutions as defined in section 4A of the Companies Act, 1956) in the new entity
TV18 was non compliant and hence would not have got necessary licenses to operate the business; its current license on CNBC-TV18 was under threat
Reason for proposed restructuring
Compliance with uplinking norms
Forced restructuring allows opportunity to consolidate businesses for TV18 Shareholders
TV 18 India Limited Promoter owned Holding company
CNBC TV 18 – English business news channel Awaaz – Hindi Business and Consumer Channel
Moneycontrol.com – Financial portal IBN – General News Channel(s)+ Portals
Commoditiescontrol.com –Commodity info portal
Strictly Private & Confidential 28
Case Study - TV 18 India Limited (cont’d)
Scheme
Demerger of Media Investment Undertaking
Merger of Indian News Business Undertaking of SGA News Limited
Consolidation of both AWAAZ and CNN IBN Channels
Existing shareholder of TV18 holding 10 shares of face value Rs 10 each would end up with
12 shares of face value Rs 5 each in Network Ltd
14 shares of face value Rs 5 each in TV18. Shareholders of SGA News for every 1 equity share of face value of Rs 10 each would get 3.67 shares of face value of
Rs 5 each to
Mr. Raghav Bahl transferred 2,868,225 Equity shares of face value Rs.10/- per share (Prior to the Record date) to Network 18 Media and Investments Limited pursuant to the Scheme
Implications
Creation of 2 listed entities Network 18 would be the holding company for strategic and financial group investments and TV 18 would act as
the operating company
No effective dilution for TV18 Shareholders
30% Reduction in capital
Funding Options for Growth improve manifold
Strictly Private & Confidential 29
Case Study - TV 18 India Limited (cont’d)
Pre-Demerger
EQ ( In Crs. ) 26.20
Price - Sep'06 600
Market Cap. 1,572
Sensex 12,962
Post-Demerger
TV 18
EQ ( In Crs. ) 28.28
Listing Price 630
Market Cap. 3,553
Sensex 14,403
NETWORK 18
EQ ( In Crs. ) 25.43
Listing Price 300
Market Cap. 1,524
Sensex 14,403
Total Market Cap.- Demerger 5,077
Incremental Market Cap. 3,505
% Wealth Creation 223%
Present Market Cap.
TV18 @ 85 1,000
NW18 @ 100 610
Total 1,610
Sensex (Nov4, 2008) 10,631
Market Cap ( x ) - Since Sep.06 1.0
top related