MBA - India Specific Knowledge Center: Investment banking

Showing posts with label Investment banking. Show all posts

Monday, July 9, 2012

Investment Banking Related to M & A in India

Authors

Narayana Rao

Mergers and Acquisitions advisory is an important practice area for investment banks.

Statutory Provisions Relating to M & A in India

Company Act, 1956

Sections 391-394 deals with the provisions related to mergers or amalgamations.

Section 327A gives powers of investment to the board of directors of a company to the extent of 60% of the company's paid up capital and free reservers or 100% of its free reserves, whichever is higher. The board can use this provision to acquire companies. Beyond these limits, a special resolution of members would be necessary.

Sections 108B and 108D are also relevant for M&A transactions.

Foreign Exchange Management Act (FEMA) Provisions

SAST Provisions

Securites Contracts Regulation Act provisions

IT Act Provisions

Stamp Duty Act Provisions

To be developed under various heads indicated

Monday, May 14, 2012

Indian Depository Receipts

Authors

Narayana Rao

Indian Depository Receipts (IDRs), the Indian counterparts of ADRs or GDRs were introduced in 2004, stipulated in the Companies (Issue of Indian Depository Receipts) Rules, 2004. IDR is a derivative instrument in the form of depository receipt created by the domestic depository in India against the underlying equity shares of the issuing company.

In the year 2000, Section 605 A of the Companies Act, 1956 was introduced and it is the first step to give foreign companies access to raise capital via the Indian stock market was taken.

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605A. Offer of Indian Depository Receipts.
¹[605A. Offer of Indian Depository Receipts.

Notwithstanding anything contained in any other law for the time being in force, the Central Government may make rules applicable for-

(a) the offer. of Indian Depository Receipts;

(b) the requirement of disclosures in prospectus or letter of offer issued in connection with Indian Depository Receipts;

(c) the manner. in which the Indian Depository Receipts shall be dealt in a depository mode and by custodian and underwriters;

(d) the manner of sale, transfer or transmission of Indian Depository Receipts,

by a company incorporated, or to be incorporated outside India, whether. the company has or has not been established or, will not establish any place of business in India.]

1. Ins. by Act 53 of 2000, sec. 216 (w.e.f. 13-12-2000).

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The second step was taken in 2004 when the Indian Depository Receipt rules were framed.

Finally SEBI has taken the third step on April 3^rd 2006, in the back drop of the Indian stock exchanges boom, by the introduction of Chapter VIA in the Disclosure and Investor Protection Guidelines, by framing the eligibility criteria as to which foreign companies will be permitted to raise capital on the Indian bourses by issuing IDRs against their underlying shares.

Issuers Eligibility Criteria.

Must have an average; turn over of US$ 500 million during the previous 3 financial years.
Must have capital and free reserves which must aggregate to atleast US$100 million.
Must be making a profit for the previous 5 years and must have declared a dividend of 10% in each such year.
The pre issue debt-equity ratio must be not more than 2:1.
Must be listed in its home country.
Must not be prohibited by any regulatory body to issue securities
Must have a good track record with compliance with securities market regulations.
Must comply with any additional criteria set by SEBI.

Who can Invest?

Indian Companies
Qualified Institutional Buyers
NRI’s and FII’s with permission of the Reserve Bank Of India.

The Issue

The minimum issue size is Rs. 50 crores,
90% of the issue must be subscribed.
Automatic fungibility is not permitted.

The following conditions would also apply:

In one financial year the market cap cannot exceed 15 % of the paid up capital and free reserves of the issuer
Redemption into underlying shares is prohibited for 1 year, beginning the issue date.
Repatriation of proceeds is subject to Indian foreign exchange laws, prevailing at time of repatriation.
The issue must be in rupees.

The issuer is subject to Clause 49 of the listing agreement.

There was news of Arceler-Mittal plans to issue IDR in 2007.

http://www.efinancialnews.com/investmentbanking/equities/secondaries/content/2349247104

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Bibliography

2008

Why there are no takers for Indian Depository Receipts, Economic Times, 5 January 2008

http://economictimes.indiatimes.com/Markets/Money_Markets/No_takers_for_Indian_Depository_Receipts_i-bankers_blame_it_on_lack_of_will/rssarticleshow/2675903.cms

2004

Suggested disclosure norms by SEBI

http://www.sebi.gov.in/commreport/idr.html

Fungibility of Depository Receipts in India

Fungibility of Depository Receipts

Authors

Narayana Rao

Fungibility provides the option for converting depository receipts into underlying shares. This provisionor facility provides two way exist route to a foreign investor. He can sell the depository receipt in his domestic exchange or he can convert the DR into underlying shares and sell them on the foreign stock exchange.

Indian ADRs/GDRs

The Reserve Bank of India issued the operative guidelines on February 13,2002 permitting the re-issuance of the depository receipts. However, domestic and financial institutional investors had not taken any advantage till August 2002. The first ever two- way fungibility was concluded in the shares of Chennai based India Cements Ltd. Though it was a very small transaction, yet it paved the way for two-way fungibility in Indian capital markets.

RBI Guidelines

http://rbidocs.rbi.org.in/rdocs/notification/PDFs/26519.pdf

http://rbidocs.rbi.org.in/rdocs/notification/PDFs/26518.pdf

http://myicwai.com/knowledgebank/fm22.pdf

ADR arbitrage Opportunities - Fungibility has a role
http://people.hbs.edu/mdesai/IFM05/AmaryOttoni.pdf

Reviewed 3.3.2011

OTC Exchange of India

Authors

Narayana Rao

OTCEI was incorporated in 1990 as a Section 25 company under the Companies Act 1956 and is recognized as a stock exchange under Section 4 of the Securities Contracts Regulation Act, 1956. The Exchange was set up to aid enterprising promoters in raising finance for new projects in a cost effective manner and to provide investors with a transparent & efficient mode of trading.

Modelled along the lines of the NASDAQ market of USA, OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading, sponsorship of companies, market making and scripless trading. The Exchange today has 115 listings and has assisted in providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant mineral water, etc.

IPO Process on OTCEI

http://www.otcei.net/ipo/

OTCEI is an active exchange in 2011

Visit http://www.otcei.net/product/Announcements-2010-2011.htm

Reviewed 3.3.2011

Sunday, April 29, 2012

Section 81 - Companies Act India - Further Issue of Shares by a Company

81. Further issue of capital

(1) Where at any time after the expiry of two years the formation of a company or at any time after the expiry of one year from the allotment of shares in that company made for the first time after its formation, whichever is earlier, it is proposed to increase the subscribers capital of the company by allotment of further shares, then,

(a) such further shares shall be offered to the persons who, at the date of the offer, are holders of the equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid-up on those shares at that date;

(b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined;

(c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person; and the notice referred to in clause (b) shall contain a statement of this right;

(d) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company.

Explanation.-In this sub-section, "equity share capital" and "equity shares" have the same meaning as in section 85.

(1A) Notwithstanding anything contained in sub-section (1), the further shares aforesaid may be offered to any persons whether or not those persons include the persons referred to in clause (a) of sub-section (1) in any manner whatsoever-

(a) if a special resolution to that effect is passed by the company in general meeting, or

(b) where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board of directors in this behalf, that the proposal is most beneficial to the company.

(2) Nothing in clause (c) of sub-section (1) shall be deemed-

(a) to extend the time within which the offer should be accepted, or

(b) to authorise any person to exercise the right of renunciation for a second time, on the ground that the person in whose favour the renunciation was first made has declined to take the shares comprised in the renunciation.

(3) Nothing in this section shall apply-

(a) to a private company; or

(b) to the increase of the subscribed capital of a public company caused by the exercise of an option attached to debentures issued or loans raised by the company-

(i) to convert such debentures or loans into shares in the company, or

(ii) to subscribe for shares in the company:

Provided that the terms of issue of such debentures or the terms of such loans include a term providing for such option and such term-

(a) either has been approved by the Central Government before the issue of debentures or the raising of the loans, or is in conformity with the rules, if any, made by that Government in this behalf; and

(b) in the case of debentures or loans other than debentures issued to, or loans obtained from, the Government or any institution specified by the Central Government in this behalf, has also been approved by a special resolution passed by the company in general meeting before the issue of the debentures or the raising of the loans.

(4) Notwithstanding anything contained in the foregoing provisions of this section, where any debentures have been issued to, or loans have been obtained from, the Government by a company, whether such debentures have been issued or loans have been obtained before or after the commencement of the Companies (Amendment) Act, 1963, the Central Government may, if in its opinion it is necessary in the public interest so to do, by order, direct that such debentures or loans or any part thereof shall be converted into shares in the company on such terms and conditions as appear to that Government to be reasonable in the circumstances of the case, even if the terms of issue of such debentures or the terms of such loans do not include a term providing for an option for such conversion.

(5) In determining the terms and conditions of such conversion, the Central Government shall have due regard to the following circumstances, that is to say, the financial position of the company, the terms of issue of the debentures or the terms of the loans, as the case may be, the rate of interest payable on the debentures or the loans, the capital of the company, its loan liabilities, its reserves, its profits during the preceding five years and the current market price of the shares in the company.

(6) A copy of every order proposed to be issued by the Central Government under sub-section (4) shall be laid in draft before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions.

(7) If the terms and conditions of such conversion are not acceptable to the company, the company may, within thirty days from the date of communication to it of such order or within such further time as may be granted by the Court, prefer an appeal to the Court in regard to such terms and conditions and the decision of the Court on such appeal and, subject only to such decision, the order of the Central Government under sub-section (4) shall be final and conclusive.

Original knol post 269

Friday, April 13, 2012

ICDR - 2009 - India - Public Issue - IPO - SEBI Regulation - Part 7

Advertisement - preissue, Issue opening and closing, Period of subscription, Minimum application value, Allotment procedure, and Utilization of proceeds

Issues Covered

Period of subscription

Pre-issue advertisement for public issue

Issue opening and issue closing advertisement for public issue (Section 48)

Allotment procedure and basis of allotment (Section 50)

Utilisation of subscription money (Section 51)

Period of subscription

(Section 46)
(1) A public issue shall be kept open for at least three working days but not more than ten working

days including the days for which the issue is kept open in case of revision in price band.

(2) In case the price band in a public issue made through the book building process is revised, the

bidding (issue) period disclosed in the red herring prospectus shall be extended for a minimum period

of three working days:

Provided that the total bidding period shall not exceed ten working days.

Pre-issue advertisement for public issue

Section 47
(1) Subject to the provisions of section 66 of the Companies Act, 1956, the issuer shall, after

registering the red herring prospectus (in case of a book built issue) or prospectus (in case of fixed

price issue) with the Registrar of Companies, make a pre-issue advertisement in one English

national daily newspaper with wide circulation, Hindi national daily newspaper with wide

circulation and one regional language newspaper with wide circulation at the place where the

registered office of the issuer is situated.

(2) The pre-issue advertisement shall be in the format and shall contain the disclosures specified in

Part A of Schedule XIII
.

Issue opening and issue closing advertisement for public issue (Section 48)

An issuer may issue advertisements for issue opening and issue closing advertisements, which

shall be in the formats specified in

Parts B and C of Schedule XIII.
Minimum application value (Section 49)
(1) The issuer shall stipulate in the offer document, the minimum application size in terms of

number of specified securities which shall fall within the range of minimum application value of

five thousand rupees to seven thousand rupees.

(2) The issuer shall invite applications in multiples of the minimum application value, an illustration

whereof is given in

Schedule XIV.

(3) The minimum sum payable on application shall not be less than twenty five per cent. of the issue

price:

Provided that in case of an offer for sale, the issue price payable for each specified security shall be

brought in at the time of application.

Explanation
:

For the purpose of this regulation, “minimum application value” shall be with reference

to the issue price of the specified securities and not with reference to the amount payable on

application.

Allotment procedure and basis of allotment (Section 50)

(1) The allotment of specified securities to applicants other than anchor investors shall be on

proportionate basis within the specified investor categories and the number of securities allotted

shall be rounded off to the nearest integer, subject to minimum allotment being equal to the

minimum application size as determined and disclosed by the issuer.

(2) The executive director or managing director of the designated stock exchange along with the

post issue lead merchant bankers and registrars to the issue shall ensure that the basis of allotment

is finalised in a fair and proper manner in accordance with the allotment procedure as specified in

Schedule XV
.

Utilisation of subscription money (Section 51)

The post-issue lead merchant banker shall ensure that moneys received in respect of the issue

are released to the issuer in compliance with the provisions of section 73 of the Companies Act,

1956.

Original knol - http://knol.google.com/k/narayana-rao/icdr-2009-india-public-issue-ipo-sebi/2utb2lsm2k7a/ 1840

Friday, April 6, 2012

Private Equity and Venture Capital Funds and Firms - Operating/Investing in India

3i Group Plc.

Current Investments

International Cars & Motors

UFO Moviez Pvt Ltd (Mumbai)

Delhi
Suite 1751,
ITC Maurya,
Diplomatic Enclave,
New Delhi 110 021
Tel: +91 11 4166 8830
Fax: +91 11 4166 8831

Mumbai
3rd floor, Nicholas Piramal Tower
Peninsula Park, Ganpatrao Kadam Marg
Lower Parel (West),
Mumbai - 400 013
India.
Tel : +91-22-66523131
Fax : +91-22-66523141

http://www.3i.com/local/india-contact-us.html

Advent International corporation

CAMS (India)

Financial Services BPO

Contact:

Avnish Mehra (London),
+44 (0)20 7333 0800, amehra@uk.adventinternational.com.

American International Group Inc.

Apax Partners

Mumbai

t: +91 22 4050 8400

Apollo Global Management Llc.

New York-based Apollo Management, which has assets in excess of $40 billion under management has appointed Mintoo Bhandari to head the India operations, who was till now a partner at the UK unit of Apollo Management.

He is currently in the process of putting together a team in Mumbai.

Apollo Management's real estate investment arm, Apollo Real Estate Advisors, currently runs a $650 million real estate private equity fund in India in partnership with Delhi-based Khemka family's SUN group. Apollo is currently investing from its sixth private equity fund, Apollo Investment Fund VI, L.P., which together with related co-investment entities, involves about $12 billion of new capital.

Bain Capital Llc.

Blackstone Group

Akhil Gupta

Mumbai

+91 (0)22 6752 8507

gupta@blackstone.com

Carlyle Group Llc.

Mumbai
Quadrant 'A', The IL&FS Financial Centre
Bandra-Kurla Complex
Bandra (East), Mumbai 400 051
India
P +91 22 6647 0800
F +91 22 6647 0803

Citigroup Venture Capital International

Investment Partner
PR Srinivasan

Citi Venture Capital International - India
2nd Floor, Plot C 61, Citigroup Center
Bandra Kurla Complex
G Block, Bandra (E), Mumbai 400051
India
T: 91-22-40015757
F: 91-22-26535816

Indian portfolio

JBF Industries Limited
8th Floor, Express Tower
Nariman Point. Mumbai - 21, India
Website: www.jbfindia.com

Fortress capital Investors Llc.

Goldman Sachs Group Inc.

Helion Venture Partners

http://www.helionvc.com/

IDG Ventures India

http://www.idgvcindia.com/

IndoUS Venture Partners

http://www.iuvp.com/

Kohlberg Kravis Roberts and Co.

Hong Kong
KKR Asia Limited
25/F AIG Tower
1 Connaught Road, Central
Hong Kong
+(852) 3602-7300

Nexus Venture Partners

http://www.nexusvp.com/

Providence Equity Partners Llc.

New Delhi

Birla Tower
25 Barakhamba Road
6th Floor
New Delhi 110 001
India
+91 11 3041 9000 Phone
+91 11 3041 9090 Fax

Texas pacific Group.

Mumbai

153, Maker Chamber VI
Nariman Point
Mumbai 400 02
India
+(91-22) 4039-1000 phone
+(91-22) 4039-1002 fax

http://www.texaspacificgroup.com/

Warburg Pincus Llc.

Mumbai Office

Warburg Pincus India Pvt. Ltd.
7th Floor, Express Towers
Nariman Point
Mumbai 400 021, India

Phone: +(91) 22 6650 0000
Fax: +(91) 22 6650 0001

http://www.warburgpincus.com/

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Related knols

Angel Investors, Venture Capitalists, Venture Facilitators and Venture Law in India

Original knol - http://knol.google.com/k/narayana-rao/private-equity-and-venture-capital/2utb2lsm2k7a/ 183