nov 20 option 2

November 2020 150/-

LEGAL

ACQUISITIONGrowth strategy for the Digital Age:

HCL acquires Australian IT company DWS

Britannia Industries Issuances of

Bonus Debentures the Third Time

INSOLVENCYResolution plan for ACCIL

by JSW Steel

MERGERElectrosteel Castings and Srikalahasthi

Pipes merge to consolidate its position

STRATEGYVoltamp Transformers Ltd streamlines

promoter shareholding structure

BLOCKBUSTER

DEAL: Reliance

Retail to Acquire

Future Group

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

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Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Other Online & Off line Models:Know your Company's Worth (Valuation Models)

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m i .ergers ndia com

The world is uncertain of when we will be looking at

COVID-19 pandemic in our rear-view mirror. Even post

announcement of vaccine by PFIZER, people and

businesses now behave and take all decisions

considering COVID-19 is going to be with us for period

much longer than it was envisaged earlier. Any black

swan event like this one has both positive and

negative impact. Business needs to adjust and

recalibrate its processes and products to remain

profitable in the changed circumstances. There is an

overall increase in activities both in terms of

production and consumption, but still, nobody can be

sure whether this is a temporary or long-term trend.

Regardless of that, companies around the world

have become much agile and cost reduction are

substantial and most likely sustainable. Companies

in IT, ecommerce and Pharma are more active in M&A

because of positive impact of such a negative event

and it is so also because world market is flush with

funds and interest rates are at historical lows.

In yet another acquisition spree, HCL Technologies will acquire DWS limited, expanding its

geographical reach to give digital transformation services to Australia and New Zealand

region. IT industry sitting on cash over the past few years have fast forwarded their

acquisition strategies as the need for digital transformation is increasing post COVID

situation. The consideration will be in full equity-pay out I.e., HCL shall issues its shares to DWS

shareholders worth ~₹850 Crores.

In order to consolidate its position in the ductile iron (DI) pipe industry, the boards of Kolkata-

based Electrosteel Castings (ECL) and its associate company Srikalahasthi Pipes (SPL)

approved a draft scheme of amalgamation, proposing that shareholders of SPL receive 59

equity shares of ECL for every 10 equity shares held in SPL. it is kind of a reverse merger as

profitable company will merger into loss making company to address some regulatory

restrictions in transfer of rights in certain assets and for ease of execution.

This would be the 3rd month in the row where we are covering an article on a restructuring

done by Reliance Industries. In a blockbuster deal in the Retail Sector in India, Reliance group

had announced acquisition of retail business of Future group which has run into a hurdle with

Amazon stopping the deal claiming violation of non-compete and right of first refusal clause

which most likely will be overturned. The debt-ridden and overleveraged future group was

forced to sell of its business to avoid defaulting on its liabilities.

Collapsing of holding and subsidiary structure to streamline promoter's shareholding has

been used quite frequently in the past. In case of Voltamp Transformers Ltd. (VTL) it seems to

be a thought-out process over a period of few years as they are merging their holding

company Kunjal investment Pvt. Ltd. into VTL post some share buyback, sale of assets and

inter-se promoter transfers. It would be interesting to note the tax implication and whether

the grandfathering clause applicability in case of sale of holding post scheme approval.

Rarely do we come across schemes where Issue of Bonus debentures and Dividends is done,

but Britannia Industries has been doing this for quite some time. The recent announcement

would be its third time of issuance of Bonus Debentures. The legal article ventures into this

unpopular way and its impact on the shareholders and from point of view of Companies Act

and Income Tax. It gives promoters huge liquidity which is even more than profits earned by

the company by dipping into accumulated reserves.

Asian Colour Coated Ispat Limited (ACCIL) was included in the Reserve Bank of India's second

list of defaulters on which banks were asked to take corrective action with claims of ~₹11,950

crores out which ₹7123.22 Crores were admitted. Resolution plan submitted in March 2019 by

JSW steel was not approved by the CoC thus leading to revision of the plan amount to ₹1550

Crores which was finally accepted by majority of CoC in Oct 2020. JSW Steel now will have

acquired 3 big companies through the bankruptcy route.

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

Mr. Shriprasad Pise

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.,

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Plot no 27, Mitramandal Colony,

Parvati, Pune - 411 009.

Telefax : 020 24420209

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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,

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us.

Disclaimer

HU Mergersindia.com Pvt. Ltd.

Dr. Haresh Shah

Along with our regular features

Happy Reading….

www.mergersindia.com www.mnacritique.com 03

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04 Vol. XXIX Issue No. 8 November 2020

M&A

DigestTHE WHYS and THE HOWSwww.mnacritique.com

LEGAL

COVER ARTICLE BLOCKBUSTER DEAL: Reliance

Retail to Acquire Future Group

ACQUISITIONGrowth strategy for the Digital Age:


20



14

17

10

05

INSOLVENCYResolution plan for ACCIL

by JSW Steel

MERGERElectrosteel Castings and Srikalahasthi


STRATEGYVoltamp Transformers Ltd streamlines


M&A DIGEST27

31

LEG

AL




Britannia a leading food company in India,

m o s t t r u s t e d f o o d b ra n d s a n d

manufacturer of numerous biscuits, a

public limited company having its equity

shares listed on BSE Limited and National

Stock Exchange of India Limited.

The Board of Directors of the company on

5th October 2020 has approved Scheme

of Arrangement between members and

the company for issuance of debentures

by way of bonus and declaration of

dividend. Aer the approval of scheme,

the shareholders will receive 1 fully paid-

up only debenture of face value of INR

29/- by way of bonus and dividend of INR

12.50/- per fully paid-up equity share.

Though HUL was the first to come out

with similar scheme as early as in 2001,

Britannia is issuing bonus debentures

third time. Salient features of Earlier two

schemes i.e., one approved on February 11,

2010 and second on August 5, 2019 along

with current scheme are:

CS Shriprasad Pise

Current Scheme of 2020Particulars Scheme approved in 2019Scheme approved in 2010

“Effective Date" means the day on

which last of the conditions

specified in Clause 11

(Conditions Precedent) of this

Sec. 230 to 232 of Companies Act,

2013

Appointed Date means Effective

Date.

Sec. 230 to 232 of Companies Act,

2013

Effective Date means the date on

which the Debentures are allotted to

the members of the Company as on

the Record Date.

Specific date has been mentioned i.e.,

Appointed Date means opening of

business hours on April 1, 2018

Not mentioned

Means the Date on which certified

copy of the order of the high court at

Kolkata (Calcutta) approving the

scheme is filed with RoC, West Bengal

Sec. 391 of Companies Act, 1956

Effective Date

Applicable Section

Appointed date


Scheme are complied with or

otherwise duly waived.

Means such date as may be fixed

by the Board of Directors of the

Company aer approval of the

Scheme.

NA

Will be paid by utilization of General

reserve

No-Security, as Debentures are

unsecured in nature

Unsecured, Non-Convertible,

Redeemable, fully paid-up

debentures of face value of INR 29/-

Shall be determined by Board of

Directors aer approval of scheme

before allotment

A Dividend of INR 12.50/- per fully

paid-up equity shares by utilization

of Accumulated Profits.

Means the date to be fixed by the

Board of Directors of the Company

upon sanction of the scheme.

Secured, non-convertible, redeemable,

fully paid-up debentures of face value

of INR 30/-

Inserted Article 136A

Secured by first charge or charge

paripassu with any first charge on

moveable or immovable assets of the

Company.

8% per annum

By utilization of Accumulated Profits

NA

Secured fully paid non-convertible

bonus debentures of Rs. 170 each

Date fixed by the BoD aer Effective

Date by reference to which eligibility

of members for issue & allotment of

debentures will be decided by the Co.

property and first charge on

Company’s movable assets restricted

to inventories and plant & machinery

Out of General reserve

8.25% per annum

NA

Secured by way of first mortgage

created on identified immovable

NA

Coupon Rate

Security

Declaration of dividend

Amendment in AoA

Utilization of amount for

payment of Debentures

Record Date

Issue of Debentures as bonus

Though HUL was the first to come outwith similar scheme as early as in 2001,Britannia is issuing bonus debenturesthird time.

Aer MCA Circular dated August 21, 2019,

it is not mandatory to provide any specific

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

Arrangement as Appointed Date. Here in

current scheme of Arrangement there is

no undertak ing wh ich is gett ing

t ra n s fe rre d b u t fo r d e te rm i n i n g

Accumulated Profits for the purpose of

issuing debentures and declaration of

dividend

The Scheme:

In earlier approved scheme BIL has issued

8.25% & 8% Secured Debentures, while

through current scheme BIL want to issue

Unsecured Debentures.

Secured / Unsecured

Debentures

Rule 18 of Companies (Shares Capital and

Debentures) Rules, 2014, provides for

certain conditions to be complied for issue

of Secured Debentures. Though there are

very less compliance for issue of

Unsecured Debentures, the Company is

following near about all the compliances

of Secured Debentures viz Appointment

Appointed Date:

Coupon Rate:

Further wh i le i ssu ing unsecured

debentures, one needs to comply with

provisions relating to acceptance of fixed

deposits. However according to rule 21(1)

(c) of the companies (acceptance of

deposits) Rules, 2014, clause (x), amount

raised as unsecured debentures is now

exempt . so, cons ider ing the sa id

provisions, the current scheme provides

for unsecured debentures.

In a scheme of 2009 and 2019 a fixed rate

of interest on bonus debentures viz 8.25

% and 8% per annum respectively was

mentioned while in a current scheme

there is no specific interest rate, discretion

has been given to Board of Directors to fix

the rate of Interest post approval of the

scheme.

of Debenture Trustee, Debenture Trust

Deed etc.

Issue of Debentures

Though section 71 deals with debentures,

it has failed to mention when rate of

interest to be fixed and whether same can

floating or not. The scheme provides for

fixation of interest rate aer approval of

the Scheme and before allotment by the

Board of Directors.

Through Scheme of 2019, the Company

has issued Secured debentures by

utilizing accumulated profits (i.e., P&L

Account balance part of Reserve and

Surplus) and currently BIL would like to

issue unsecured debentures by utilizing

Accumulated profits which also includes

balance in General Reserve along with

retained earnings.

As per section 2 (43) free reserve can be

utilized for distribution of dividend. Unlike

of section 205 of Companies Act, 1956,

section 123 of the Companies Act, 2013

the Appointed Date needs to be

fixed.

https://mnacritique.mergersindia.com/importance-of-appointed-date-effective-date-in-restructuring/




a) out of the profits of the company for

that year arrived at aer providing for

depreciation in accordance with the

provisions of sub-section (2), or

does not require mandatory transfer of

certain amount of profit to General

reserve prior to declaration of dividend.

So General reserve will be considered

dead for declaration of dividend. So, by

including general reserve as part of the

scheme, the Company is effectively using

balance in General reserve to distribute

funds to shareho lder by way of

Debenture & Dividend. Further, inclusion

of dividend as part of scheme which was

not there in earlier schemes could also be

for utilization of General Reserve for

payment of dividend which is not

permissible under the provisions of

Section 123 of the Companies Act, 2013

e x c e p t u n d e r e x t r a o r d i n a r y

circumstances and as provided in the

Companies (Declaration and Payment of

Dividend) Rules, 2014.

Section 123 of the Companies Act, 2013

dealt with declaration of dividend and

provided for some restrictions or

co n d i t i o n s to b e f u l fi l l e d b e fo re

declaration. The question is when there

are specific provisions, whether the

company can declare dividends beyond

specified in Sec 123 by using powers and

provisions of Sec 230 to Sec 232 for

arrangements with shareholders.

As per Section 123 (1) (a) a company may

declare or pay dividend for any financial

year:

Why Dividend through

Scheme?

b) out of the profits of the company for

any previous financial year or years

arrived at aer providing for depreciation

in accordance with the provisions of that

sub-section and remaining undistributed,

or

c) out of both

As per Section 123 (3) Interim Dividend

may be declared by the Board of

Directors

a) out of the surplus in the profit and

loss account or

b) out of profits of the financial year for

which such interim dividend is sought to

be declared or

c) out of profits generated in the

financial year till the quarter preceding

the date of declaration of the interim

dividend,

Cons ider ing the re st r i c t ions for

declaration of dividend, the Board of

Directors can neither pay interim

dividend nor final dividend out of the

General Reserves under extraordinary

circumstances and compliance of relevant

rules. The Scheme has provided the

definition of accumulated profit which

also includes General Reserve. Dividend of

INR 12.50 will be declared through

Accumulated profits which also means

through general Reserve. Balance of

General Reserve as on 31st March 2020

was INR 893.74. Crores. Thus, debentures

amounting to INR 698crs will be paid

through the balance amount lying in

General reserve & remaining balance of

general Reserve amounting to INR 195

Crores will be utilized for distribution of

the dividend which is not permitted as per

Section 123 hence clause 4.4 of the

scheme talks about non-applicability of

provisions of Companies Act, 2013. Thus,

through this arrangement the company is

likely to exhaust General Reserves and

payment proposed is neither interim

dividend nor final dividend but only

arrangements under Sec 230-232 of the

Act.

S e c 2 3 0 ( 1 ) w h i c h d e fi n e s t e rm

“arrangements” seems to have wider

import and cover all or any type of

arrangements with shareholders

including payment out of reserves and

Can Companies take benefits of section

230-232 (“arrangement”) to override

applicable provisions of the Companies

Act in order to go beyond limit prescribed

under the section?

There are provisions in the Companies

Act, 2013 for every corporate transaction,

actions, in some cases approval of board

is required while in some cases approval

of shareholder will require to carry on

such transactions, but some of the

businesses wherein Act is silent.

In absence of specific provisions and

considering issue of bonus debentures as

an arrangement between the Company

and its members, an application needs to

be made to NCLT (National Company Law

Tribunal) under section 230 to 232 (Ref:

Scheme of Arrangement of Britannia

2019).

Arrangement between

Company & its members

Record Date and

Effective Date

There is no spec ific prov is ion in

talks about Record Date, it is at discretion

of the Board of Directors of the Company

to fix the record date aer approval to the

Scheme from Tribunal. As per Section 232

(6) every Scheme should clearly indicate

the date from which Scheme can be

effective. As per Rule 19 of Securities

Contracts (Regulation) Rules, 1957 read

with circular no. CFD/DIL3/CIR/2017/21

dated March 10, 2017 amended via circular

CFD/DIL3/CIR/2018/2 dated January 03,

whenever the law wanted to provide

exclusion and follow specific section say

buyback of shares than by Sec 230(10) it

provides that any buyback needs to

comply Sec 68. The Tribunal has widest

discretion to approve any sort of

arrangement between the Company and

its shareholders, if it does not have any

negative impact on rights of creditors or

other stakeholders.

Companies Act, rules or regulations which

talks about Record Date,

The Tribunal has widest discretion toapprove or disprove any sort ofarrangement between the Companyand its shareholders, post examinationof impact on rights of creditors or otherstake holders

https://mnacritique.mergersindia.com/demerger-man-industries-record-date/





Increase in borrowing

limits

Clause 13.5 of the scheme it has been

mentioned that approval of the members

to the scheme will be considered deemed

approval to the increase in borrowing limit

from Rs. 2000 Cr to Rs. 5000 Cr which is

more than NetWorth of BIL. The point to

be noted that, for approval of the scheme

requirement of resolution is majority of

persons representing three-fourths in

value of the creditors, or class of creditors

or members or class of members voting in

person or by proxy or by postal ballot,

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

arrangement. {Sec. 230 (6)}.

In a Scheme of Arrangement of BIL,

Record Date is to be fixed by Board of

Directors aer approval of the Scheme,

however in a clause 4.2 it has been

mentioned that the date of declaration for

purpose of allotment of debentures and

payment of dividend shall be effective

date, further as per clause 6.1the

debentures and dividend need to be

issued and paid within 30 days of record

date.

2018 Para (III)(A)(5) of Annexure I of said

circular states that:

“listing of specified securities to be

completed and trading in securities

commences within sixty days of receipt of

the order of the Hon'ble High Court/NCLT.”

Seeing the situation, the Board of

D i rectors need to exped iate the

proceeding to fix the Record Date and

allot the debentures, and pay the

dividend within specified time aer the

effective date i.e., aer the approval of

scheme by the Tribunal but before filing of

the order with Registrar of Companies.

As Company is issuing 1 bonus debenture

with face value of Rs. 29/-to the

shareholders, the total amount of

borrowing will be:

The resolution for increase in borrowing

limits through the scheme will now be

passed with stringent requirements of

majorities in numbers and 75% of the

values of the members. The matter of

increase in borrowing limits will get

rejected if shareholders does not approve

the Scheme.

One need to understand that, on the one

h a n d C o m p a n y i s g i v i n g b o n u s

debentures and declaring highest ever

dividend per share out of accumulated

profits and contrary increasing borrowing

limits.

Bonus Shares vs Bonus

Debentures vs Dividend

The issue of bonus shares does not

directly affect net-worth of the company

while issue of bonus debentures will not

only reduce net worth but also increases

debt., which would have double impact on

d e b t- e q u i t y ra t i o . D i v i d e n d i s a

distribution of a company's earnings to its

shareholders and it reduces net worth to

that extent. Bonus shares has no impact

on cash flow of the company while share

dividend have immediate impact on cash

flow as against Bonus debentures results

in cash outflow in terms of redemption of

debentures and payment of interest

though delayed based on terms of the

debentures.

The provis ions Sect ion 63 of the

Companies Act, 2013 deals with issue of

bonus shares, the provisions of Section

123 deals with declaration and payment of

dividend while provisions for issue of

bonus debentures are nowhere defined in

the Companies Act, hence companies go

through scheme under Sec 230 to Sec

232.

Britannia is issuing bonus debentures

third time first in year 2009 then in

previous year i.e., 2019 and now the

The shareholders are not getting direct

cash benefits by issue of bonus debentures.

The shareholders can get interest payment

and payment on annual redemption of

debentures, further once listed the

shareholder having an option to sell their

debentures in secondary market and

encash debentures. So, stakeholders

receive handsome monetary benefit

without any tax liability, but they are liable

for tax on receipt of annual interest and gain

on sell of debentures. From April 1, 2020 the

tax liability of Dividend Distribution tax is

shied from donor to receiver.

This Scheme if sanctioned will result in outlet

of INR 1000 Crores (though amount of

debentures is not immediate output).

Interestingly as on 30th September 2020

the cash and cash equivalent in the

Standalone books are showing circa INR 410

Crore (including current investment of INR

373 Crores). Though issue of Bonus

debentures is beneficial for company as well

as shareholders, it is not a much popular.

Both Companies Act 1956 and 2013 failed to

recognize and provide the provisions for

such innovative technique which is in best

interest of corporates as well as members,

aer all who do not like Bonus.

Impact on Shareholders

current scheme. The bonus debentures

dated 5th August has subsequently

listed on Stock Exchanges. The due date

for redemption of said debentures is 28th

August 2022.

The shareholders are not getting directcash benefits but an option of selling insecondary market post schemeapproval thus shiing the tax liabilityfrom company to shareholders

Amount of debentures

Long-term Existing Borrowing

Total amount of borrowing post

allotment of debentures

698.10

1200.58

1898.68

ParticularAmountin Crores

Table 2: Borrowing Limits for BIL as on 31st March 2020

(All Figs in ₹ Crores)

The company law explicitly covers various

aspects of conversion of debt into equity

including hybrid securities and convertible

debentures. It also covers and prescribed

procedures for return of excess capital to

the shareholders, but it is silent on

conversion of net worth and/or equity into

debt, though in some way Income Tax Act

recognizes the possibility by way of

various sub sections viz Sec. 2 (22) of the

Income tax Act,1961.

The bonus debentures

issued in last year through NCLT order

dated 5th August 2019,

https://mnacritique.mergersindia.com/britannia-industries-100-year-bonus-debuntures/

https://mnacritique.mergersindia.com/future-retail-acquisition-hypercity-kishore-biyani/




09

The reason for non-specific provisions in

the act could be that it may not be a clever

idea to provide for such conversion and

even to pay shareholders out of future cash

flow.

One of rationale mentioned in scheme

about high cash richness of the Company is

true or not? Seems like it is dividend trough

borrowings. One of the reasons for heavy

distribution of cash through dividend is cash

strangled group companies.

NATIONAL NEWS

M&A


Equitas mullsmerger with NBFCto pare promoterstake

He said that Equitas would be keen to explore a merger

with a non-bank lender either in the housing finance or

vehicle finance space or any other areas where it has

already diversified. “It will be easier to integrate with such

a lender as we have already gained business expertise in

the areas we diversified,” he said.

The bank's initial public offer (IPO), which will be open for

subscription on October 20, would help it to reduce

promoter holding to about 82% from 95%. As per the

licensing agreement with RBI, the bank needs to pare it

further to 40% by September 2021.

Bandhan Bank, India's first experiment with a

microfinance lender converting into a universal bank, had

also followed a two-pronged strategy of merger and

block deal for reducing promoters' stake to the

regulatory minimum.

The Equitas Small Finance has begun exploring the

possibility of a merger with a non-bank lender as a follow-

up measure to pare promoters' holding to 40% as

mandated by the Reserve Bank of India.

Equitas has even identified a few potential candidates.

If an SFB reaches the net worth of Rs 500 crore, listing is

mandatory within three years of reaching that net worth.

Equitas' IPO consisted of a fresh issue aggregating up to

Rs 280 crore and an offer for sale of up to 7.2 crore equity

shares at Rs 32-33 price band.

Earlier, the group had sought RBI's permission for a

reverse merger of the promoter with the bank. The

regulator had then told it that such a request would only

be considered aer the promoter comply with the

minimum holding rule.

The promoter Equitas Holding Ltd will lap the offer for

sale to reduce its stake.

The offer closed on October 22.

For small finance banks, if the initial shareholding of the

promoters is more than 40%, it should be brought down

to 40% within a period of five years from the date of

commencement of business and thereaer to 30%

within 10 years and to 26% within 12 years.

10 Vol. XXIX Issue No. 8 November 2020Vol. XXIX Issue No. 8 November 2020

HCL Technologies Ltd will acquire

Australian information technology and

business consulting company DWS Ltd.

In a regulatory filing, the company said

the total equity value pay-out will be 158.2

million Australian dollars (about Rs 850.33

crore) aer considering a total number of

shares at 131.83 million on a fully diluted

basis. The shareholders of DWS will also

get a dividend of 0.03 Australian dollars

per share which was declared by the

company in its recent announcement of

Annual Corporate Earnings for FY20

(June-end). The filing noted that 100%

shares will be acquired through a Scheme

of Arrangement aer approval by DWS

shareholders. The acquisition is subject to

regulatory approvals and is expected to

complete by December this year.

The deal will augment HCL's capacity to

service the growing demand for digital

strategies in the Australian and New

Zealand markets. HCL has invested in the

region for over two decades -- at present,

it employs 1,600 people in major cities like

Canberra, Sydney, Melbourne, Brisbane,

and Perth – and is committed to enabling

digitalisation and growing the local

ecosystem. The acquisition brings in the

marquee ANZ clientele and will provide

the company linear growth opportunities

such as geographical, client reach and

cross selling venues.

The acquisition comes two months aer

Roshni Nadar Malhotra, the daughter of

founder Shiv Nadar, was appointed as the

company's chairperson. Shiv Nadar,

however, will hold the title of chief strategy

o ffi c e r . F o r N o i d a - b a s e d H C L

Technologies, acquisitions will be a part of

the growth strategy as it has chalked out

digital transformation, cloud business and

next-gen technologies as a focus area for

growth. In fact, the company has been

quite aggressive in acquiring companies

and has struck a dozen deals in India and

overseas since 2015. In May, HCL

Technologies acquired products and

The deal will augment HCL's capacity toservice the growing demand for digitalstrategies in the Australian and NewZealand markets

ACQ

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Growth strategy for the Digital Age:


Saikat Neogi

11

services built on Cisco Systems Inc.'s

network technology for $50 million in

cash.

The acquisition will not only boost HCL's

revenue and geographic presence, it will

also lead to margin expansion because of

higher offshoring. It is estimated that the

acquisition will help to add around 1% to

HCL's top line in FY22 as it will aid in

expanding presence in Australia and New

Zealand. The company will also be able to

cross sell and up sell to existing clients of

DWS. As revenues of DWS fell in two of the

last five fiscal years and operating

profitability soened, HCL's execution

ca p a b i l i t i e s ca n h e l p i t i m p rove

profitability and extract better value. The

acquisition will be done by HCL Australia

Services Pty. Limited, a wholly owned

s t e p - d o w n s u b s i d i a r y o f H C L

Technologies Ltd.

Hybrid cloud, digital workplace, networks,

cyber-security are some of the strong

service offerings from the company as

these have become critical for any

transformational plans. The company has

underlined that it will look at acquisitions

in the digital and product space to build

innovative products and expand in some

geographies.

Done deal

For HCL, the rationale for the acquisition is

that DWS generates around 29% of

revenues from banking & financials, 43%

from government & defence, 6% from

utilities and 7% from IT services and

others 15%. As DWS has over 700

employees and offices in Melbourne,

Sydney, Adelaide, Brisbane and Canberra

and delivers business and technology

innovation to large clients across a

spectrum of verticals, it will help HCL to

leapfrog and scale in terms of growth and

presence in the region.

With the Covid-19 pandemic, there is

urgency amongst clients for technology

adoption, and modernization of digital

services. Financial services continue to be

leader in terms of client demand followed

by life sciences and healthcare, telecom

a n d c o m m u n i c a t i o n . A s d i g i t a l

technologies transform business models

around the globe, enterprises are

increasing their technology spending.

Over the last few years, companies

across the globe have also been investing

i n m i d d l e - o ffi c e a n d b a c k- o ffi c e

transformation. These initiatives are

del ivering significant value to the

companies and are forming the core

strategy for forward looking enterprises,

helping them drive significant revenue

Investments in digital, analytics, cloud,

internet of things (IoT), cybersecurity and

other emerging technologies have been

growing exponentially in nearly every

large enterprise and that growth is likely

to continue. In the initial phase of

digitization, the early adoption was driven

by front-office transformation.

growth, improved customer experience

and reduction in cost. So, the acquisition

of DWS will help HCL capture a higher

share of already expanding market in

digital services space.

HCL's growth strategy

The company's unique business model

has helped it to achieve growth. It

launched a new business unit called HCL

Soware, which provides modernised

soware products to help businesses

transform their environment. It acquired

select IBM products for secur ity ,

market ing , commerce and d ig i ta l

Transaction

Source: Company’s Website/Annual Report

DWS

HCL Australia Services Pty. LimitedA Step-Down Subsidiary of HCL Tecnologies

HCL share worth

Aus $158.2 Million

(~₹850 Crores)

will be issued to

DWS Shareholders100%

Acquisition


solutions - AppScan, BigFix, Commerce,

Connections, Digital Experience (Portal

and Content Manager), Notes, Domino

and Unica. The business made significant

progress last year, onboarding over 2,000

partners and concluding over 13,000

sales transactions.

The company's revenue has increased

from Rs 47,568 crore in FY17 to Rs 70,676

crore in FY20, with a compounded annual

growth rate (CAGR) of 14.1% over the last

three years. The company has over

1,50,000 employees across 49 countries,

with women constituting 26% of its

workforce. In FY20, the company's Mode 2

and Mode 3 revenue – that derived from

next-generation technologies such as

digital and analytics, IoT, cloud, and

cybersecurity, as well as new products

The company also added several other

capabilities to its portfolio as it acquired

Strong-Br idge Env is ion , a d ig i ta l

transformation consulting firm and

expanded its preferred professional

services partnership with Broadcom to

include Symantec Enterprise Division. The

company created a separate division

called ERX within its Engineering and R&D

business to drive an IP-led strategy in the

s e g m e n t a n d a c q u i r e d S a n k a l p

Semiconductor, an advanced technology

d e s i g n s e r v i ce s p ro v i d e r i n t h e

semiconductor space.

About HCL Technologies

The company offers its services and

products through three business units -

IT and Bus iness Serv ices ( ITBS) ,

Engineering and R&D Services (ERS) and

Products & Platforms (P&P). ITBS enables

global enterprises to transform their

businesses through offerings in areas of

applications, infrastructure, digital

process operations and next generational

digital transformation solutions. ERS

offers engineering services and solutions

in all aspects of product development and

platform engineering while under P&P,

HCL provides modernised soware

products to global clients for their

technology and industry spec ific

requirements. Through its cutting-edge

co-innovation labs, global delivery

capabilities and broad global network,

HCL delivers holistic services in various

industry verticals.

To capture benefits of new technology and

give end to end services to the present

customers, all big IT companies are

acquiring small niche companies or tie up

with them to create value for their present

c u s t o m e r s . G i v e n t h e g r o w i n g

opportunities in cloud consumption, cyber

security, automation, app modernisation,

the deal is positive for HCL Tech's revenue

trajectory. To be sure, HCL Tech has

established itself as digital transformation

service provider in Australia and the DWS

acquisition will enhance its capabilities and

12000

10000

8000

6000

4000

2000

0

80000

70000

60000

50000

40000

30000

20000

10000

0

FY17 FY19FY18 FY20

Revenue

10120

8721

11057

47

56

8

60

42

7

50

56

9

70

67

6

8606

Net Profit

Revenue & Net Profit of HCL Technologies(All Figs in ₹ Crores)

All big IT companies are acquiring ordoing a tie-up with small nichecompanies to create value for theirpresent customers

REVENUE BREAK-UP of HCL Tech for FY’20

72%

17%

11%

GEOGRAPHY-WISESEGMENT-WISE

America

Europe

India

Rest of World

IT and business services

Engineering and R&D Services

Products & Platforms

72%

27%

12%3%

and platforms – accounted for one-third

of the revenue.

About DWS Ltd

DWS is an ASX-listed Australian-based IT

services company which provides a suite

of integrated solut ions, inc luding

consulting services, such as custom

application development and project

management and digital solutions, such

as data automation and design services.

DWS was established in 1991 by current

CEO, Danny Wallis, and was listed on the

Australian Stock Exchange (ASX) in June

2006. DWS is headquartered in Melbourne

with Australian-based offices located in

Sydney, Brisbane, Adelaide and Canberra

and has over 700 employees. In FY20, the

company had revenue of A$ 167.9 million.

13

customer portfolio further as the company

has a healthy mix across verticals and its

customer base is diverse. These factors

wil l help the company enhance its

capabilities across verticals and diversify

the customer base.

As demand for digital technologies

accelerates and cost savings create

opportunities to replace traditional

technologies, the market for large digital

transformation deals and managed

services is growing. Technology services

companies are investing in soware

products and platforms that transform

them into end-to-end solution providers.

They are using mergers and acquisitions

to acquire digital capabilities and access

into newer geographies. Now, HCL must

complete the DWS integration process

quickly to accelerate its growth curve.

NATIONAL NEWS

M&A


Tatas in talks tobuy stake inIndiaMart: Report

Tata Group, India's conglomerate that sells almost

everything from cars to apparel and steel, is seeking to

buy Indian online retailers to beef up its presence in e-

commerce, people familiar with the matter said.

The group has reached out to IndiaMart InterMesh Ltd., a

business-to-business marketplace, for a potential stake

purchase, the people said, asking not to be identified as

the plans are confidential. IndiaMart's shares have

surged 142% in Mumbai this year, giving it a market value

of about $2 billion. Supermarket Grocery Supplies Pvt.

Ltd commonly known as BigBasket, is also among Tata's

potential investment targets, one of the people said.

Mumbai-based Tata Group, which owns Jaguar Land

Rover and tea maker Tetley, is scouting for local e-

commerce assets at a time when the race for Indian

online shoppers is heating up. While billionaire Mukesh

Ambani's JioMart is seeking to shake up the industry

“Any talk of IndiaMart being in discussions with Tata

Group for investment or acquisition is completely

baseless," Dinesh Agarwal, founder and chief executive

officer of IndiaMart, said in a response to a Bloomberg

News query.

The expansion of Ambani's Reliance Industries Ltd. into

technology and retail businesses has added urgency to

Tata's plans. The tycoon, who's Asia's richest man, raised

more than $20 billion this year, selling 33% of his

technology venture Jio Platforms Ltd. to investors

including Facebook Inc. and Google. His Reliance Retail

Ventures Ltd. has embarked on its own fundraising

spree, mopping up $5.1 billion from private equity and

sovereign wealth funds in the past two months.

dominated by the local units of Amazon.com Inc. and

Walmart Inc., Tata is seeking potential acquisitions to

narrow the gap with its rivals.

Tata's digital platform will centre around an all-in-one e-

commerce app that aims to bring disparate online

businesses of its entrenched consumer units under one

umbrella. These include Tanishq jewelry stores, Titan

watch showrooms, Star Bazaar supermarkets, chain of

Taj hotels and a joint venture with Starbucks Corp. in

India.

On its website, IndiaMart says it controls 60% of the

Indian online B2B classified market, providing a platform

to small and medium enterprises. It was founded in 1999

and has 3,150 employees located across 84 offices across

the country.


Asian Colour Coated Ispat Limited

(ACCIL), a steel company, in the year

2018 was included in the Reserve Bank of

India's second list of defaulters on which

banks were asked to take corrective

action. State Bank of India, Punjab

National Bank and JM Financial were

among the lenders to ACCIL. Hon'ble

National Company Law Tribunal (NCLT)

on 20th July 2018 admitted the company

petition for the commencement of

Corporate Insolvency Resolution Process

(CIRP) of ACCIL. Total claim received by the

RP from all the creditors was Rs.11,949.97

Crores out of which amount of claim

admitted by the Resolution Professional

was Rs.7,123.22 Crores.

Aer inviting expression of interest (EOI)

by the RP, 12 EOI were received by the RP.

JSW Steel Limited became a Successful

Resolution Applicant through its wholly

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

INSO

LVE

NCY

Resolution plan for ACCIL by JSW Steel

Sanket Joshi

owned subsidiary JSW Steel Coated

Products L imited (JSWSCPL)

submitted unsigned resolution plan on

8th March 2019 amounting to Rs. 1200

Crore. The Resolution Applicant aer

considering the additional facts and

feedback received from the committee of

creditors (CoC), revised the plan value

from Rs. 1200 Crores to Rs. 1550 Crores.

The resolution plan was approved with

79.3% of voting shares of the CoC. The

Delhi Bench of NCLT (National Company

Law Tribunal) on 19th October 2020

approved the resolution plan submitted

by JSW Steel to acquire bankrupt steel

company ACCIL for Rs 1,550 crore.

Unsecured Financial Creditors comprising

of Corporation Bank, Union Bank of India,

IDBI Bank, Commercial Bank of Dubai,

Indian Overseas bank, Karur Vyasa Bank

aggregating to 8.66% of voting share in

the CoC who are the lenders of a related

party of the ACCIL to whom ACCIL

provided corporate guarantee filed an

application and who dissented to the

resolution plan , sought relief for change

in the distribution of the payment to

financial and operational creditors since

they are getting settled at much lower

percentage as compared to the

operational creditors.

In reply to the saying of financial creditors

w.r.t differential payment, Resolution

Applicant has stated that it is the CoC that

must assess and analyse the feasibility

and viability of the plan and the manner of

distribution. In the section 30 (4) of the IBC,

it has been clarified that CoC can decide

the distribution inter-se creditors taking

into consideration the nature of security.

There are various judgments which gives

paramount importance to the commercial

wisdom of the CoC.

NCLT aer hearing the all the parties in

the application concluded that there shall

not be any differential treatment, inter-se

creditors falling under section 30(2)(b) of

the code, Explanation-1 of sec. 30(2)(b)

says that distribution shall be fair and

equitable to such creditors. Accordingly,

NCLT disposed of the application and

directed the resolution applicant to

distribute the amount in between

unsecured financial creditors and

operational creditors at equal percentage

by applying the same haircut.

Unsecured Financial Creditors have

replied their saying on the point that since

the operational creditors are getting paid

more than the Financial Creditors there is

a violation of section 53 of the IBC

(Insolvency and Bankruptcy Code) which

deals with the distribution of proceeds

from the sale of the liquidation assets.

15

Provision under IBC

Section 30 of the IBC deals with the

submission of resolution plan by the

Resolut ion Appl icants. Resolut ion

Professional is required to examine such

resolution plan and ensure that it

complies with provisions given under sub-

section (2) of the section 30.

Section 30 also contains the provision

regarding payment to financial creditors

who have not given their assent to the

resolution plan. Pursuant to section

30(2)(b) in case of dissenting financial

creditors amount being paid to such

creditors under the resolution plan shall

not be less than the amount being paid to

such creditors as if company is in

l iquidation and amount is getting

distributed as per section 53(1) of the IBC.

Explanation-1 given under section 30(2) of

In the Resolution Plan submitted by the

JSW Stee l prov is ion prov ided to

operational creditors is 4.86 % in

comparison with provision made to

dissenting financial creditors i.e., 1.47 %

which is contravening the explanation

given under section 30(2)(b) of the Code.

Though NCLT is not required to go in detail

commercial wisdom of the resolution plan

approved by CoC, under section 31 of the

IBC before giving nod to the Resolution

Plan, NCLT shall ensure that there is no

violation of section 30 (2) of the IBC. Upon

the application filed by the dissenting

Financial Creditors NCLT has correctly

directed the Resolution Applicant to

distribute the Resolution Amount at equal

percentage.

IBC has clarified that distribution between

the dissenting financial creditors and

operational creditors shall be fair and

equitable.

Payment to creditors

(% of admitted claim)

Secured Creditors

Unsecured Financial Creditors

Operational Creditors

Original Plan –

Rs. 1200 Crores

17.1%

17.1%

14.57%

Revised Plan –

Rs.1550 Crores

30.84%

1.47%

4.86%

Table 1: Original and Revised Resolution Plan Comparison

ACCIL was included inthe Reserve Bank of India's secondlist of defaulters in 2018

Amount Claimed by Creditors(July 2018)

Amount Admitted by RP(July 2018)

Amount as per accepted Resolution Plan(October 2020)

Total

₹1,550

Crores

₹1,499.99

₹25

₹0.10 ₹9.87₹9.87₹9.87

₹15.05₹15.05₹15.05

Total

₹7,123.22

Crores

₹4,864.40

₹229.26₹229.26₹229.26

₹1,292.60

₹335.86₹335.86₹335.86

₹0.10

Total

₹11,949.97

Crores

₹4,866.12₹4,716.47

₹2,124.72

₹222.06₹222.06₹222.06

₹0.30₹0.30₹0.30

OVERALL HAIRCUT of ~78%

Secured Financial Creditors

Unsecured Financial Creditors

Operational Creditors (Government)

Operational Creditors (Employees & Workmen)

Operational Creditors (Other than above)


In the past, JSW Steel has completed

acquisition of two companies and is in

process to acquire the Bhushan Power

and Steel Limited (BSPL). Resolution plan

submitted by the JSW Steel amounting to

Rs.19,350 Crores has been approved by

the NCLT and National Company Law

Appellate Tribunal (NCLAT).

Resolution plans

submitted by JSW Steel

in past

In order to implement the resolution plan

submitted for the revival of ACCIL, JSW

Steel has formed a whol ly owned

subsidiary JSWSCPL and JSWSCPL has

further formed a wholly owned subsidiary

named as Hasaud Steel Limited (HSL) by

infusing Rs.1,550 crores through mix of

equity/ quasi equity/debt instrument.

Implementation of

Resolution Plan

HSL has paid ₹ 1476.94 crores to certain

financial creditors of ACCIL, towards

assignment of their ACCIL loans, and has

infused ₹ 73.06 crores into ACCIL in the

form of a loan, for onward payments to

operat ional creditors , workmen /

employees, and other financial creditors

of ACCIL, in full discharge of JSWSCPL's

obligations under the Resolution Plan.

The existing issued equity share capital of

ACCIL comprising of 88,07,76,270 equity

shares of face value ₹.10 each held by the

existing shareholders are cancelled and

extinguished without any payment to the

shareholders in accordance with the

Resolution Plan.

Structuring of a

Transaction

Financials

ACCIL is a multi-location steel major with a

vast array of close annealed coils and

sheets (in plain, corrugated and profile

forms) having a wide range of applications

across Industries.

Its major products are Cold Rolled

coils/sheets, Galvanised Corrugated

Sheets, Colour Coated Coils/sheets.

With this acquisition, JSW Steel will have

successfully acquired three stressed assets

through bankruptcy court--one being

Monnet Ispat and Energy Ltd, Vardhman

Industries and now ACCIL. Considering

management capab i l i t ie s and deep

understanding of the business, no doubt

JSW team will be able to use those assets to

generate economic profit and create value

for all the stakeholders.

Particulars (MTPA)

Year of commencement of operations

Manpower strength including Contract workers

Land Area (Owned)

Picking

Cold Rolling

Galvanising

Colour Coating

Khopoli

2014

~500

~54 Acres

8,00,000

6,00,000

2,20,000

1,30,000

Bawal

2007

~475

~15 Acres

1,80,000

1,80,000

4,50,000

60,000

Table 2: ACCIPL Plant Details

Particulars

Property, Plant & Eq.

Net worth

Borrowings

Revenue

EBITDA

EBIT

Finance Cost

PAT

FY 2019

2992

-2026

3357

2932

75

-80

492

-788

FY 2018

3166

-1246

3237

3348

92

-80

506

-1283

Table 3: Financials of ACCIPL (All Figs in ₹ Crores)

Particulars

Revenue

EBITDA

EBIT

PAT

Net worth

Borrowings (Estimated)

H1FY 21

30,116

6039

3843

1862

37,032

54,000

FY20

71,116

12,419

8173

3818

36,024

59,373

Table 4: Financials of JSW Ltd. (All Figs in ₹ Crores)

Sr No.

1.

2.

3.

Resolution Amount (₹ Crores)

2,875

63.50

19,350

Name

Monnet Ispat and Energy Limited

Vardhman Industries Limited

Bhushan Power and Steel Limited

September 2018

December 2019

In Process

Year of acquisition

JSW Steel produces flat sheet products that include, hot rolled coils, cold-rolled coils and coated products

like galvanised, galvalume, tinplate and colour coated. The FY 20, revenue share of Cold Rolling, Galvanised

and colour coating was 16%, 8% and 5% respectively.

Souce: Company’s website/annual Reports

Steel

₹1,550 Crores

infused

WoS

Infused funds to be used

to pay to the COC as per accepted

Resolution Plan

WoS

JSW Steel Coated Products

Limited (JSWSCPL)

Hausad Steel Limited (HSL)A Step Down Subsidiary of JSW

Electrosteel Castings Limited

(ECL) is a listed company and it engaged in

the manufacture and supply of Ductile Iron

(DI) Pipes, Ductile Iron Fittings (DIF) and

Cast iron (CI) Pipes as its core business

and produces and supplies Pig Iron, in the

process. It also produces Metallurgic Coke,

S i n t e r a n d P o w e r f o r c a p t i v e

consumption.

In order to consolidate its position in the

ductile iron (DI) pipe industry, the boards of

Kolkata-based Electrosteel Castings (ECL)

and its associate company Srikalahasthi

Pipes (SPL) approved a scheme of

a m a l g a m a t i o n , p r o p o s i n g t h a t

shareholders of SPL receive 59 equity

shares of ECL for every 10 equity shares

held in SPL. The scheme would be subject

to s t a ke h o l d e r s ' a n d re g u l a to r y

authorities' approval and the merger

process is likely to be completed by the

end of this fiscal's third quarter. Both ECL

and SPL are listed with the BSE and NSE.

Srikalahasthi Pipes Limited

(SPL) is a listed company and it engaged in

the manufacture and supply of Ductile Iron

ME

RG

ER

Electrosteel Castings and Srikalahasthi


Padam Singh


Pipe as its core business and in the

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.

SPL is proposed to be merged with ECL

through scheme of merger. Appointed date

for the same is 01st October 2020.

Exchange ratio: 59 shares of ECL of Rs 1 each

for Every 10 Shares of SPL of Rs 10 each.

The Transaction

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

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.

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.


PRE-TRANSACTION SHAREHOLDING

OF SRIKALAHASTI PIPES LTD. (As on 30.09.2020)

Shareholding pattern

(Pre & Post Merger)

Electrosteel Castings Ltd (ECL)

Murari Investment and Trading

G.K. Investment Ltd

G.K. & Sons Private Ltd

Uttam Commercial Company Ltd.

Promoters

Shareholding

(48.14%)

41.33%

2.07%

1.30%1.17%1.17%1.17%

2.27%

Public

Shareholding

(51.86%)

50.16%

1.43%1.43%1.43%

Mayank kejriwal (Joint MD of ECL)

Other

ANDHRA PRADESH INDUSTRIAL DEVELOPMENT

CORPORATION LIMITED holds 0.52% shares in SPL

and has one nominee director on the board.

POST MERGER

SHAREHOLDING

PATTERN OF ELECTRO

STEEL CASTINGS

Promoters Holding (44.01%)Source: Company’s Website

Public

UTTAM Commercial Company Ltd.

Individual (Mayank Kejriwal Family)

Murari Investment and Trading

G.K. Investment Ltd.

G.K. & Sons Private Ltd.

Others

55.99%

4.35%

8.19%

6.64%

5.00%

8.52%

11.31%

Promotors increased stake by about 3% in last six month

including some shares bought as late as in last week of

September 2020. that also leads to insider trading

allegations. Due to these transactions this scheme may

get glitches from regulators.

PRE-TRANSACTION

SHAREHOLDING OF

ELECTROSTEEL

CASTINGS (As on 30.09.2020)

UTTAM Commercial Company Ltd.

Individual (Mayank Kejriwal Family)

Others

Public

PromotersSource: Company’s Website

44.81%

5.23%

10.34%

39.62%

Combined Capacity

Particulars

Installed Capacity (MTPA)

DI Pipes

Pig Iron

Coke Oven Plant

Power

Cement

Sinter Plant

CI Pipes

DI fittings &

Accessories

Ferro alloy Plant

SPL

3,00,000

2,75,000

2,70,000

14.5MW

90,000

5,00,000

-

-

-

ECL

2,80,000

-

2,25,000

5MW

-

-

90,000

12,667

6,277

Total

5,80,000

2,75,000

4,95,000

19.5MW

90,000

5,00,000

90,000

12,667

6,277

*SPL sold ₹ 127.94 crores of material to ECL and ECL sold ₹

18.56 crores of material to SPL.

**Aer adjustment of related party transaction.

Financials (₹ in Lakhs)

Particulars

Revenue*

PAT

Finance Cost

Depreciation and

Amortisation

Expense

EBITDA%

Borrowings

Advances givento KMP of ECLfor Supply ofGoods

Net Worth

Debt equityratio

SPL

1,72,659*

18,768

4,620

4,117

18.76%

53,332

2,275

1,41,615

0.38

ECL

2,74,425

8,630

22,758

5,715

14.5%

1,71,813

2,88,137

0.60

Consolidated

4,32,434 **

27,397

27,379

9,831

16.72%

2,25,145

2,275

3,57,205

0.63

-

Pig Iron, Coke Oven Plant, Cement and

Ferro alloy Plant are used captively to

produce DI Pipes and CI Pipes.

The merger will give a cutting edge to ECL as

it will result in backword integration for ECL.

Aer merger ECL will get access to its raw

material i.e., Pig Iron, which is used in the

manufacturing of CI Pipes, it currently

buys from domestic market including 127

crores from SPL the transferor company.

Because of now large capacity of about

30% market share, it will be able to bid for

larger contracts in Di Pipes.

Aer merger EBITDA of ECL increase from

14.5% to 16.72%. due to low finance cost of

SPL. Average finance cost of ECL is 13.08%

whereas 10.06% for SPL. Aer merger, the

Debt equity ratio of the ECL decreases

slightly. In December 2017 SPL raise ₹. 250

crores capital through QIP (Qualified

Institutions Placement). Further, ECL will

get free access to significant cash & Cash

equivalent available with SPL.

Aer merger, the debt equity ratio of the

ECL improves which may enable them to

raise finance at cheaper rate. It also saves

on GST and working capital due to captive

consumption of many intermediate

p ro d u c t s . i t w i l l u n l o c k va l u e fo r

shareholders of ECL by combining

profitable operation of its subsidiary. It is

possible that dividend yield for the present

shareholders of SPL will get reduced

s u b s t a n t i a l l y b u t t h e y m a y g e t

compensated by way of higher share price.


As both companies are in new tax regime,

merged entity will not be able to utilise carry

forward losses. Reasons for reverse

merger seems to be mining rights and

litigation related to mines, higher value of

immovable properties, large government

contracts and difficulties in transfer and

registration with government authorities

of new entity, and number of JVs (Joint

Venture) and subsidiaries of ECL, and

Reverse merger manufacturing facilities of ECL in Two

state (West Bengal and Tamil Nadu).

However, if loss making ECL would have

merged with profit making SPL, then the

resulting capital base post amalgamation

would have been much lower because of

t h a t i t w i l l b e e a s i e r to s e r v i ce

shareholders.

Not required working capital for GST

payment on capt ive consumption

amounting to Rs. ~26 crores.

NATIONAL NEWS

M&A


BigBasket in talksto sell majoritystake to Tata Group

China's internet giant Alibaba, which holds around 26%

stake in BigBasket, is expected to sell its entire

shareholding in the company along with a group of early

backers, said another person who did not want to be

identified. Other investors in the e-grocery company

include Ascent Capital, CDC Group and the Abraaj Group.

India's largest e-grocer BigBasket is in advanced

negotiations with the Tata Group to divest a majority

stake in favour of the salt-to-soware services

conglomerate, according to three people in the know. The

deal, which is still evolving, could see the Bengaluru-

based company sell around 50% stake for about $1

billion, the sources said.

Tata Group executives, privy to the discussions, said the

conglomerate is likely to execute the deal through its

digital arm — Tata Digital — and that (the investment in

BigBasket) "is just step one of several other similar tie-

ups and collaborations that the group is looking to strike

(in order) to scale its digital presence". ET had earlier

reported that the Tata Group has held talks with

BigBasket as well as ecommerce companies Snapdeal

and IndiaMart. "This is not an easy deal to pull off with so

many investors involved… but there should be some

finality to the talks in a couple of weeks," the sources said.

A Tata Group executive speaking to ET on the condition

of anonymity said the conglomerate is looking to acquire

internet companies as "scalability of business through a

combination of online and offline is seen as critical for

future growth".

In recent times, Tata Sons has also committed significant

capital to its retail arms such as Trent, which operates

Westside and Landmark, a bookstore chain, as well as

Infiniti Retail, a subsidiary of the Tata Group that runs

Croma stores.

Separately, BigBasket has also held discussions, sources

said, to rope in a bunch of new investors like Singapore's

Te m a s e k , U S - b a s e d G e n e ra t i o n I nve s t m e n t

Management, Fidelity and Tybourne Capital, for a $350-

400 million financing round. The fundraising process,

which began earlier this year, coincided with Reliance

Industries announcing its intent to push grocery

eCommerce through JioMart.

The Covid-19 led lockdown has helped players like

BigBasket shore up order volumes amid a significant

shi towards online shopping. At the start of the

lockdown in April, BigBasket fulfilled 160,000 orders daily

but its base of consumers has steadily grown since then,

with the retailer clocking Rs 750-900 crore in monthly

sales. The company is expected to close this fiscal year

with about Rs 9,000 crore in gross sales.

COV

ER

ST

OR

Y

BLOCKBUSTER

DEAL: Reliance

Retail to Acquire

Future GroupPadam Singh

Logistics & Retail Business undertakingof Future Group shall be acquired byReliance Retails via Slump Sale


Mukesh Ambani's Reliance Industries Ltd

has announced the acquisition of Kishore

Biyani's Future Group to expand its retail

business and bolster e-commerce.

However, the deal has run into legal

trouble with global e-commerce giant

Amazon which says the deal was a

violation of a non-compete clause and a

right-of-first-refusal pact it had signed

with the Future Group earlier.

Reliance Retail Ventures Limited

(RRVL) is a Reliance Industries Limited

(RIL) subsidiary company and having

presence in the business of supply chain

management for retail. RRVL is a holding

company for the retail business of RIL.

R e l i a n ce R e t a i l a n d Fa s h i o n

Lifestyle Limited (RRFLL) is Wholly

owned subsidiary (WoS) of RRVL and is in

the business of dealing in all kinds of

goods and managing & operating stores

a n d m a l l s e t c . T h e Co m p a n y i s

incorporated for this transaction and will

take over entire retail business of Future

group.

Future Group includes 20 companies of

future group which are party to this

transaction. These 20 companies include

6 l isted companies namely Future

Enterpr ise L imited (FEL) , Future

Consumer L imited (FCL) , Future

Lifestyle Fashions Limited (FLFL),

Future Market Network Limited (FMNL),

Future Supply Chain Solutions Limited

(FSCSL) and Future Retail Limited (FRL).

The remaining companies are wholly

owned subsidiary of Future Bazaar India

Limited (FBIL) which in turn is a wholly

owned subs id iary of FEL . These

companies are engaged in FMCG, Fashion

Products, clothing, wholesale, retail and

Reliance Retail Limited (RRL) is WoS

of RRVL and the company is engaged in

organized retail spanning across various

consumption baskets primarily catering

to Indian consumers. RIL’s entire current

retail business is carried through RRL.

logistic infrastructure and warehousing.

The Transaction

On 29th August 2020, RIL announced

taking over the entire retail and logistic

business of Future group through slump

Sale. The transaction will be structured as:

Step 1: Consolidation of Retail &

Logistic business of Future group to FEL

Step 2: Slump Sale of Retail & Logistic

Undertaking of FEL (Post-Consolidation)

to Reliance group.



Interestingly, purchase of business of Future group will be done through 2 different slump sales:

· Slump Sale of Logistic & Warehousing Undertaking in RRVL

· Slump Sale of Retail & Wholesale Undertaking in RRFLL


Future Group remaining

business aer transaction

Aer completion of proposed transaction,

F u t u r e g r o u p w i l l r e m a i n w i t h

manufacturing of FMCG products,

Retail & Logistic Business

of Future group.

Logistics & Warehousing Business: means the entire logistics & warehousing

businesses carried by Future group.

“Retail & Wholesale Business” means

the retail & wholesale business of FEL,

that consists of all the large format

stores, premium supermarket format

stores, small stores, convenience stores,

cash and carry and wholesale stores,

franchised, franchisee stores, consumer

goods, food products, fashion products,

apparel, general merchandise, consumer

durables, electronics, IT products, brands

etc . A l l inte l lectual property and

intellectual property rights, brands, logos,

des igns , labels , tradenames, and

trademarks relating to fast moving

grocery and home and personal care

consumer goods and apparel shall form

part of the Retail & Wholesale Business.

Integrated garment designing, sourcing,

and manufacturing business, Insurance

business (partnership with Generali) and

other assets like Joint venture with

National Textile Corporation (NTC) with

development rights in for Apollo Mills and

Goldmohur Mills. Further, Praxis Home

Retail Limited, one of future group listed

companies will be retained by Future

group. The manufacturing of FMCG

products & Garments may continue to

supply to RRFLL.

Reliance group has also signed non-

Other Key Terms in the

Scheme:

Appointed Date for the transaction (Step 1) will be effective date and for Slump Sale Transaction will be aer effectiveness of Step 1.

Consideration

Particulars

Slump Sale Consideration

Logistic and Warehousing Undertaking

Retail & Wholesale Undertaking

Total

Less: Deposit in Escrow Account for

Direct Tax Liabilities

Available for Distribution

Cash Consideration

25

5,628

5,654

1000

4,654

Loan Repay

676

18,383

19,059

Total

701

24,012

24,713

Table 1: Consideration Bifurcation (Figs in ₹Crores)

compete agreement with FEL and Kishor

Biyani Family for a period of 15 (Fieen)

years from the Effective Date.

Further Reliance will also support by

providing financial assistance by way of

loan and other facilities to FEL during the

scheme.

If the Effective Date does not occur on

or before 31 March 2021 or such other date

as may be determined by RRVL and/or

RRFLL, this Scheme shall become null and

void. Considering the recent legal

challenges faced from Amazon, RRVL

may extend the dates.

Logistics & WarehousingBusiness Undertaking

Retail & Wholesale BusinessUndertaking

Manufacturing of FMCG &Apparel Business Undertaking

Insurance BusinessUndertaking

Other Activities Undertaking(Including JN with MTC)

Remaining Business Undertaking with FEL

SETP 2Slump Sale of Business

Slump Sale into RRFLLfor ₹24,012 Crores

Slump Sale into RRVLfor ₹701 Crores

Fundraising from PE of₹37,000 Crores was done in RRVL

Reliance Retail Venture Limited(RRVL) A Subsidiary of RJL

Reliance Retail & FashionLifestyle limited (RRFLL)

(XXXXXXXXXXXX)

Both WoS have similar Businessesof Organized Retail and Wholesale

Reliance Retail Ltd (RRL)


Reason to not merge RIL's existing retailbusiness with future group businesscould be to protect any future liabilitieswith respect to retail undertaking of FEL.

Liquidity Constrain

Reasons for exit by the

pioneer of retail Future

Group:

strengthen numero uno position in Indian

Retail sector with a consolidated turnover

exceedingly circa 1.60 lakh crores but also

enable them with wider product portfolio,

deeper penetration, and multiple cross

selling opportunity. For debt laden future

group, the deal is essential for its survival.

Due to Cov id-19 bus ine sse s was

hampered as no one is coming out of

with E-Commerce

home for buying things which gets a trap

for retail business due to this liquidity

issue arises before the businessman's as

the rent and interest doesn't stop its

meter and its continuously increasing

which gives two option to businessmen's

either infuse funds or sale its business to

another person. So, the Future opts for

s e l l i n g a n d m a k e a r ra n g e m e n t

accordingly.

Unable to compete

As whole retail sector is going through a

massive digitalization, due to various

reason Future group didn't catch up the

There are ample of synergies which

Reliance Retail can reap from the

proposed acquisition. Reliance is having

presence across most of the segment's

which it is acquiring from Future group.

Reliance's other verticals like Jio Mart can

also be integrated with retail business of

Future group. In all, this acquisition will

strengthen the product portfolio, deeper

penetration and significant cross-selling

opportunities of Reliance.

Reasons for acquisition

by Reliance

Synergies between

existing products & FEL

Timing of the deal for

Reliance & immediate

funding:

The deal helped RRVL to increase its

valuation significantly more than what it

is paying to acquire retail & logistic

business of Future group as “Synergies”

must be included in the Valuations while

offering stake. The increased product

p o r t fo l i o , N o . o f s to re s , d e e p e r

penetration etc. must have resulted in

b e t t e r v a l u a t i o n o f R R V L w h i l e

approaching investors.

On August 29, Reliance Retail Ventures

Limited (RRVL) had announced a deal to

acquire the entire retail, wholesale,

logistics and warehousing businesses of

the Future Group. Immediately aer

announcement of this deal, RRVL raised

over INR 37,000 crores from various

investors.

With a massive growth of E-commerce in

India, Indian Retail sector is witnessing

extreme competition which is paving way

for consolidation. Earlier, Future Group did

mult ip le restructur ing to remain

competitive in the market. However,

despite multiple restructuring, Future

Group unable to compete with global

players.

Reliance forayed into retail space long

ago with the multiple acquisition it has

managed to become India's largest retail

player. With the help of sister concern,

Reliance Jio, it has laid down plan to

digitally transform its retail business, this

acquisition will not only help reliance to

Existing businesses in Reliance Retail Limited:Segment

Food & Grocery

Consumers Electronic

Fashions & Lifestyle

Partners Brands

Brands

Reliance Fresh, Reliance Mart, Reliance Market Stores

Reliance Digital, Reliance Digital Express Mini, Jio Stores

Reliance Trends, Trends Women, Trends Men’s, Trends Junior,

Project Eve, Reliance Jewels, Reliance Footprints, Ajio.com

Diesel, Burberry, Gas, Hamleys, Giorgio, Armani, amongst Others.

Assets & Liabilities (as on 31st Mar, 2020 in ₹Crores)

40,000

30,000

20,000

10,000

0

10,000

20,000

30,000

17,451 18,383

35,266

24,012

RRL

FEL (Retail Business)

Source: Company’s Annual ReportsAssets (Total) Liabities (Total)

With the Future Retail acquisition, Reliance gets hold of large format stores like Big Bazaar, FoodHall, FBB

(Fashion) and small format store like Easyday, Nilgiris, Central, and Brand Factory and WH Smith. Further,

Reliance Retail registers 640 million footfalls in a year (as of Fy20), and the Future Retail acquisition will add to

that with Biyani's loyal customer base with 351 million footfalls – Big Bazaar alone saw annual footfalls of 244

million (as of Fy19).

On Future Retail's acquisition, it will add about 1,700 large stores to RIL's 11,806 stores in its retail segment and

increase its organized retail revenue market share by around 5 per cent.

Some of Future group re-

jig's in last 5 years

On 21 November 2014, Future

Consumer Enterprises Limited acquired

the 98% from Actis Capital and other

promoters. With that, Nilgiris is a fully

owned subsidiary of Future Consumer

Enterprises Limited (FCEL).

bus and thus struggling to compete with

other players.

Future Group announced a 50.1%

stake sale of its fashion chain Pantaloons

to Aditya Birla Group in order to reduce its

debt of around Rs. 8,000 crores.

Skechers entered India through a JV

with Future Group in 2012. Sketchers ends

joint venture with Future group in

February 2019 by buying 49% stakes.

Investment/Support by

Reliance to FEL (Post-

Slump Sale)

To become a part of manufacturing of

FMCG products & garments, RRFLL will

invest Rs. 1,200 crores by subscribing to

equity shares of FEL, which will translate

into a 6.1% stake. It will also initially invest

Rs. 400 crores (25%) for subscribing

convertible warrants. The entire value of

warrants is Rs. 1600 crore and upon

conversion, it will result in an additional

stake of 7.1% in FEL.

Latest issue with

Amazon

Amazon holding 49 % in one of group

company of Future Group, Future Coupon.

As per term of agreement, the prior

approval of Amazon to be taken by Future

group before raising money or selling

In 2015 Future Retail done share

swap deal with Bharti Retail Limited

Future Retail has acquired Hyper

City In 2017 for a total consideration of Rs.

655 Crores


Pledge of Shares of Promotors of Future Group

Source: Company’s Annual Reports

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FEL FRL EMNL FLFL FSCSL FCL

85.42% 69.07% 97.98% 99.51% 95.13% 91.18%

Post Slump Sale, FEL would issuepreference shares and convertiblewarrants to RRFLL against investmentfrom Reliance group.

FinancialsTable 2: Financials of Future Group Companies for FY'19 (Figs in ₹Crores)

FEL FMNL FLFL FRL FSCSL FCL

6,065

598

816

154

751

4.89

43

6,943

3,912

73

53

-7

66

9.23

988

814

Total

37,459

1,054

1,252

1,139

2,193

2.51

7,450

11,752

Particulars

Revenue

Finance Cost

Depreciation and Amortization

PBT

EBIT

Interest Coverage ratio

Net worth

Borrowings

126

20

26

12

33

2.64

204

154

5,766

117

207

189

306

1.62

1,827

904

20,356

228

104

727

955

1.31

3,846

2,657

1,234

18

45

64

81

1.28

542

280

Table 3: FEL Balance Sheet Post Slump Sale and Preferential Issue (Figs in ₹Crores)

Amount Assets Amount

3290

2315

5605

Liabilities

Net Worth

Net Borrowings

Total

Net Block

Investment

Net Current Assets

Total

1045

4000

560

5605

Table 4: Revenue & EBITDA of FEL post slump sale (Figs in ₹Crores)

Revenue EBITDA

4000

3300

Particulars

FMCG

Apparel

3%

9%

https://mnacritique.mergersindia.com/consolidating-future-retail/


(Bharti Retail).

(Hyper City).






stake to another company.

Generally, awards in SIAC arbitrations

would be enforceable outside Singapore.

SIAC awards have been enforced in

various jurisdictions including Indonesia,

China, Hong Kong, India, Australia, USA,

Malaysia, Thailand, Vietnam and Jordan.

Impact on Reliance

Industries:

Whether award is

enforceable in India?

An Award in favor of Amazon, putting on

hold multi million deal between Reliance

and Future Group will definitely cause

losses and affect future planning of

JioMart of Reliance Conglomerate. The

future plans of Reliance will be on hold

because of this Award, also delay will

directly affect the shareholders of both

the companies. Future group need to

Back door listing of

Retail business & way

ahead for R-Retail

Further, aer complet ion of th is

transaction, RRFLL may merge with RRL.

The long-term aim of RRL to get listed can

be achieved through direct listing of RRVL

or either collapsing the structure & then

get it listed.

come up with an arrangement for early

execution of the deal.

To acquire retail business of FEL, RRVL

created a wholly owned subsidiary

company, RRFLL, and will park retail

business in RRFFL. One of the reasons for

not consolidating RIL's existing retail

business with future group business

could be to protect any future liabilities

with respect to retail undertaking of FEL.

The structuring is designed in such a way

that whole retail and logistic business will

become unlisted and enable Reliance to

raise funds from private equity in holding

company at huge valuation before listing

its retail business and logistic business.

Though currently the deal is stuck

because of legal challenges from Amazon,

FEL and Reliance are likely to find a way to

sail through this deal.

Post-acquisition Reliance will be able to

execute hybrid strategy of physical stores

along with robust e-tailing presence like all

global retailers.

It is god sent opportunity to Reliance

group to acquire FRL, one of the oldest and

largest reta i l conglomerates with

footprints all over India.

Every month M & A critique gives valuable insights to

over 5000 Readers from Corporate World on-

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Contact:- 020-24425826

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In a move to simplify promoter's holding,

Voltamp Transformer Limited (“VTL”)

announced amalgamation of promoter

entity with VTL.

Voltamp Transformers Limited (VTL),

established in 1963, has installed facility to

STR

AT

EG

Y

Voltamp Transformers Ltd streamlines


manufacture o i l fi l led power and

distribution transformers up to 160 MVA,

220 KV class, Resin impregnated Dry type

Transformers up to 5 MVA, 11 KV class (In

Technical collaboration with MORA,

Germany) and Cast Resin Dry Type

Transformers up to 12.5 MVA, 33 KV class

Kunjal Investment Private Limited (KIPL) is

a promoter group company holding

43,44,474 equity shares aggregating to

42.94% in Voltamp Transformers Limited.

Apart from equity shares of VTL, KIPL

does not have any significant assets.

(In Technical collaboration with HTT,

Germany). The equity shares of VTL are

listed on BSE (Bombay Stock Exchange)

and NSE (National Stock Exchange).

Anirudha Jain

Current Structure of the group:

PRE-TRANSACTION STRUCTURE OF VTL


On 24th February 2020, KIPL passed a

Board Resolution for approval of buyback

of up to 38 equity shares representing

2.92% of total paid up capital of the

company at a price of INR 42,06,647 per

share. Through buyback, KIPL distributed

INR 15.98 crores to its shareholders. The

company further amended its MOA &

AOA as on the same date.

Transaction Detail

The proposed amalgamation of KIPL into

VTL will result in promoters directly hold

shares in VTL. Further, this simplification

may result in some tax savings for the

promoters on dividend from VTL. The

s c h e m e f u r t h e r m e n t i o n a b o u t

indemnifying VTL from any liability, claims

etc of KIPL.

As on 31st March 2019, the significant

shareholders of the Company include

Kunjal Patel, Lalitkumar H Patel (HUF) and

Jwalin K Patel. However, the shareholding

pattern as on 1st June 2020 (Appointed

Date), the 99.52% shareholding of KIPL is

held by Mr. Kunjal Patel and remaining by

Mrs. Taral Kunjal Patel.

During last 5 years, KIPL has acquired

shares of VTL through open market and

through int-se transfer amongst

promoter group.

Buyback of Shares of

KIPL

Re-Alignment of

Shareholding Pattern of

KIPL

Transfer of Shares

Board of Directors of VTL, in their meeting

held on 5th May 2020, approved a Scheme

of Amalgamation of KIPL with VTL. The

appointed date of the amalgamation is 1st

J u n e 2 0 2 0 . A s a r e s u l t o f t h e

amalgamation, VTL will issue 43,44,474

exactly equivalent existing shares held by

KIPL of VTL and the earlier shares held by

KIPL will get cancelled. Thus, there will be

no change in shareholding pattern or total

n u m b e r o f s h a re s o f V T L p o s t-

amalgamation.

to KIPL

As on 31st March 2019, KIPL was holding

significant value of investments in

properties, Bonds, Equity Instruments,

Mutual Funds, and vehicles etc. However,

as on appointed date, the only significant

assets held by the company is investment

in VTL. One of the reasons for choosing

Appointed Date as 1st June 2020 could be

re-alignment of shareholding & other

assets in KIPL.

increased his shareholding in the

Company. Apart from Kunjal Patel, all

other promoters have transferred their

stake to KIPL. The value of investment in

VTL in the books of KIPL has gone up from

INR 2.36 cr as on 31st March 2018 to INR

65.59 cr as on 8th May 2020.

Applicability of

Grandfathering clause

Transfer of Assets &

Liabilities of KIPL

One of the reasons for re-alignment of

shares could be family arrangement as all

other promoters transferred their entire

shareholding to KIPL which indeed was

significantly acquired by Kunjal Patel.

Though the scheme will be tax neutral for

Though, it is unlikely that promoters will

sell shares as those newly allotted shares

all the stakeholders, the scheme may

result in additional tax liability in the

hands of promoters (for the 43,44,474

newly allotted shares) in case they decide

to sell the newly acquired shares in future.

The Financial Budget 2018 has withdrawn

tax exemption provided under Section 10

(38) of Income Tax Act, 1961 in which long

term capital gain (LTCG) arising from the

sale of listed equity securities were

exempted. Now Section 112A has been

inserted which seeks to levy tax on LTCG.

However, the investments made on or

before 31st January 2018 have been

“grandfathered” and cost of acquisition is

considered to be the cost as on 31st

January 2018.

However, to claim the benefits of “grand

fathering”, the equity shares required to

be listed as on 31st January 2018. As a

result of the re-structuring, the earlier

shares held by promoters (through KIPL)

in VTL will get cancelled and new shares of

VTL will get issued in exchange of

promoters shares in KIPL. Equity shares

of KIPL being unlisted as on 31st January

2018, one need to evaluate the chances of

not getting the benefits of grandfathering

when promoter will sell 43,44,474 newly

allotted shares.

As on 31st March 2019 As on 1st June 2020

64.41%

16.30%

18.75%

Particulars

Kunjal Patel

Lalitkumar H Patel (HUF)

Jwalin K Patel

99.52%

0

0

NumberParticulars

Total No. of Shares before Buyback

Total No. of Shares aer Buyback

1301

1263

One of the reasons for choosingAppointed Date as 1st June 2020 couldbe re-alignment of shareholding & otherassets in KIPL

KIPL StakeParticulars Other Promoter

KIPL stake in VTL as on 31st March 2015

KIPL acquired from Kunjal Patel on 20th Feb 2020

KIPL acquired from Ayushi Patel on 23rd Dec 2019

KIPL acquired from Jwalin Patel & Kunjal Patel on 30th Sep 2019

As on 30th September 2020

9.91%

NA

NA

NA

7.06%

37.57%

0.84%

0.85%

1.66%

42.94%


are substantial part of their holding in the

company.sold/transferred its all other assets. The

Scheme will not have any impact on the

minority shareholders nor any commercial

or strategic benefits to the company. The

scheme seems to be the last step in

redistributing or say to transfer all shares

directly in the name of Shri Kunjal Patel.

Though due to change in income tax

provisions, it is most likely Shri Kunjal Patel

will end up paying tax at higher rate as

compared to a company if he decides to

sell newly allotted shares in future.

The companies are completely trying to

safeguard the interest of minority

shareholders by incurring all expenditure

relating to the re-structuring by the

holding company and indemnifying the

listed entity for any liability or claims.

many other companies have filed similar

re-structuring aer Mumbai bench's

decision.

It looks KIPL started planning early and re-

a l i g n e d i t s s h a r e h o l d i n g a n d

Streamlining the promoters holding in

listed company through collapsing the

holding subsidiary structure by way of an

amalgamation is a common practice.

However, in 2018, Mumbai bench of NCLT

rejected one similar scheme of Ajanta

Pharma Limited stating that the re-

structuring only benefits the promoters

and not public shareholders. Allowing

similar re-structuring is still uncertain,

NATIONAL NEWS

M&A


NCLT approvesJSW Steel'sresolution plan forAsian ColourCoated Ispat Ltd

Asian Colour was listed for insolvency the same year,

which saw JSW Steel make an initial offer of Rs 1,200

In 2018, ACCIL was included in the Reserve Bank of India's

second list of defaulters on which banks were asked to

take corrective action. State Bank of India, Punjab

National Bank and JM Financial are among the lenders to

Asian Colour Coated Ispat.

“JSW Steel Coated Products, wholly-owned subsidiary of

JSW Steel, to acquire Asian Colour Coated with certain

modification in the resolution plan approved by the

lenders,” JSW Steel said in a statement. The written order

is awaited.

The Delhi Bench of National Company Law Tribunal on

Monday approved the resolution plan submitted by JSW

Steel to acquire bankrupt steel company Asian Colour

Coated Ispat Ltd (ACCIL) for Rs 1,550 crore.

crore. Aer this, the promoters of the company took the

case to NCLAT over a legal issue on the land owned by

the company.

ACCIL has an annual capacity of 1 million tonnes with

around 300,000 tonnes of cold-rolled steel and colour-

coated steel. The company has manufacturing facilities

in Delhi and Mumbai, and caters to markets across,

Europe, Africa, Latin and North America.

With this acquisition, JSW Steel has successfully acquired

three stressed assets through bankruptcy court--one

being Monnet Ispat and Energy Ltd for Rs 2,875 crore,

Vardhman Industries for 63 crores and now ACCIL. The

company is also in the final stages of completing the

Bhushan Power and Steel (BPSL) acquisition.

In August 2020, US-based venture capital firm Interups

made a counter offer of Rs 2,000 crore to JSW Steel's

deal. However, NCLT has now chosen JSW Steel as the

acquirer.

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NATIONAL NEWS

M&A


Govt approvesdemerger ofNagarnar steelplant from NMDC

The government on Wednesday approved demerger

of the under-construction Nagarnar steel plant (NSP)

from NMDC, and its strategic disinvestment by selling the

entire stake of the Centre to a strategic buyer. State-

owned NMDC, under the Ministry of Steel, is constructing

the steel plant at Nagarnar in Chhattisgarh.

"The Cabinet Committee on Economic Affairs (CCEA)

chaired by Prime Minister Narendra Modi has given its in-

principle approval to the demerger of Nagarnar Steel

Plant (NSP) from NMDC and strategic disinvestment of

the demerged company (NSP) by selling entire

Government of India stake in it to a strategic buyer," an

official statement said.

The CCEA has taken note that the process of demerger

and disinvestment will be initiated in parallel and

disinvestment of the demerged company (NSP) is

expected to be completed by September 2021, it said.

"Shareholders of NMDC will also be shareholders of the

demerged company (NSP) in the proportion of their

shareholding. The investors will have better visibility of

the operations and cash flow of NMDC and NSP

separately," it said.

With the demerger, the statement said, NMDC can focus

on its core activities of mining. NSP shall be a separate

company and the management of NMDC and NSP shall

be accountable for their respective operations and

financial performance.

NSP is a 3 million tonne per annum (mtpa) integrated

steel plant being set up by NMDC in Nagarnar over an

area of 1,980 acres at a revised estimated cost of Rs

The demerger will also be tax neutral from the point of

view of capital gains, it added.

23,140 crore.

As on date, NMDC has invested Rs 17,186 crore on the

project, out of which Rs 16,662 crore is from NMDC's own

funds and Rs 524 crore has been raised from the bond

market, it said.

CCI clears acquisition ofsolar energy assets byAdani Green-Total Solar JV

Competition Commission of India (CCI) has approved

the acquisition of various solar energy assets by a joint

venture of Adani Energy and Total Solar.

Adani Green Energy Twenty Three Ltd -- a joint venture

of Total Solar Singapore Pte Ltd and Adani Green Energy

Ltd -- will buy the assets from Adani Green Energy Ltd.

Adani Green Energy Ten Ltd is the holding entity of the

target companies.

According to a combination notice filed with the

watchdog, Adani Green Energy Twenty Three Ltd will

acquire 100 per cent shareholding of ten target

companies.

CCI said it has approved "acquisition of solar energy

generation assets by Adani Green Energy Twenty Three

Ltd - a joint venture of Total Solar Singapore Pte. Ltd. &

Adani Green Energy Limited".

Pursuant to the proposed combination, AGE23L will

acquire 100 per cent of the share capital of Adani Green

Energy Ten Ltd (AGE10L), which is the holding entity of

the target companies.


NATIONAL NEWS

M&A


Embassy to sellmaintenance biz oftwo office parksto REITfor ₹474 crore

The acquisition value is around ₹474 crore, said a person

familiar with the development. “In addition to enhancing

our operating income, this transaction fully integrates

and aligns property management for all REIT assets and

helps further strengthen operational relationships with

our occupiers. It will allow us to enhance service delivery,

which is particularly important to our occupiers as they

finalize 'Back to Workplace' strategies," said Michael

Holland, CEO of Embassy REIT. Embassy REIT is

acquiring the property maintenance businesses from

Embassy Services Private Limited, an Embassy Group

affiliate and expects to fund the transaction by issuing

coupon-bearing debt at the REIT level.

This strategic acquisition is expected to be net operating

income accretive and distribution per unit accretive and

enhances the REIT's ability to respond to occupier needs

and address their safety concerns during the current

pandemic situation, the company said. Once the deal is

c losed, Embassy REIT wi l l own the property

management service delivery for all its fully-owned

properties. The transaction is expected to be completed

March 2021.

Embassy REIT, India's first listed real estate

investment trust will buy the property maintenance

business of Embassy Manyata Business Park in

Bengaluru and Embassy Tech Zone in Pune. Both the

properties are part of Embassy REIT's existing portfolio

and the acquisition further integrates 20.3 million sq of

property maintenance business to the existing 9.9 million

sq properties already managed by Embassy REIT, the

company said in a stock exchange filing on Thursday.


Wipro to acquire EximiusDesign for nearly ₹586.3 crore

million (about ₹586.3 crore). In a regulatory filing, Wipro said

the purchase consideration is $80 million.

"Eximius complements Wipro's EngineeringNXT core

strengths and 35-year pedigree in VLSI and systems

design," it added.

This acquisition will help Wipro to expand into newer market

segments and elevate the customer's journey in next-

generation technologies such as connected products,

embedded AI and security, it said. Eximius Design has

around 1,100 employees and had registered consolidated

revenues of $35.2 million in 2019.

It provides end-to-end solutions and services for building

smarter, smaller and faster-connected products for various

use cases of IoT, Industry 4.0, Edge Computing, Cloud, 5G

and Artificial Intelligence. Their clientele include companies

across semiconductors , c loud and hyper-sca le

infrastructure, consumer electronics and automotive

segments.

"Eximius enables Wipro to strengthen market leadership in

VLSI and systems design services by expanding our

market presence and strengthening our technical

leadership in the semiconductor ecosystem, to help

accelerate silicon innovation for our customers," Wipro

Senior Vice President, Industrial and Engineering Services

Harmeet Chauhan said.

The acquisition is subject to customary closing conditions

and regulatory approvals and is expected to close in the

quarter ending December 31, 2020. Clients will gain access

to Wipro's global scale and offerings, along with Eximius'

innovative solutions to accelerate the adoption of ASIC,

FPGA, systems and soware engineering initiatives, Avula

added.

The acquisition is subject to customary closing conditions

and regulatory approvals and is expected to close in the

quarter ending December 31, 2020. Clients will gain access

to Wipro's global scale and offerings, along with Eximius'

innovative solutions to accelerate the adoption of ASIC,

FPGA, systems and soware engineering initiatives, Avula

added.

IT services major Wipro on Tuesday said it will acquire

engineering services company Eximius Design for $80

INTERNATIONAL NEWSINTERNATIONAL NEWS

M&A


The deal underscores the Dunkin's growth prospects

and adds major brands to Inspire's portfolio. While the

pandemic has upended consumer habits and strained

many restaurants' finances, an investment in digital

operations at Dunkin' and expansion beyond traditional

breakfast fare has helped its shares outpace the market

this year as rivals struggle.

Paul Brown, co-founder and chief executive officer of

Inspire Brands, said in a statement that the Dunkin' and

Baskin-Robbins' brands are “two of the most iconic

restaurant brands in the world” and will strengthen

Inspire with their international operations, licenses and 15

million loyalty members.

Inspire, which owns chains such as Arby's and Buffalo

Wild Wings, will take Dunkin' Brands Group Inc. private at

$106.50 a share, the companies said Friday in a

statement. That represents a 20% premium over the

closing price of Oct. 23, before reports of the deal talks

sent shares soaring. The price is 6.8% higher than

Friday's close.

The owner of Dunkin' and Baskin-Robbins agreed to

be acquired by private equity-backed Inspire Brands Inc.

in a $11.3 billion deal, one of the largest transactions ever

in a restaurant industry that's being upended by the

pandemic.

Shedding another non-core business could help Intel

focus on fixing its chip technology woes. Despite the

delays, the company's server group has been performing

well. Last year, Intel unloaded its smartphone cellular

modem group to Apple Inc. and earlier this year sold its

home connectivity chips group to MaxLinear Inc. In July,

the company also said it is considering moving away

from manufacturing its own chips. Intel had previously

said for several months it was exploring options for the

flash group.

The Asian memory chipmaker said in a statement

Tuesday it will pay 10.3 trillion won for the Intel unit, which

makes flash memory components for computers and

other devices. The acquisition includes Intel's solid-state

drive, Nand flash and wafer businesses as well as a

production facility in the northeastern Chinese city of

Dalian.

Since taking over as Intel chief executive officer in 2019,

Bob Swan has looked to sell several units that aren't part

of the company's focus on processors for personal

computers and servers. The Santa Clara, California-

based company has delayed production of important

upcoming chip lines and now lags behind some industry

players in manufacturing technology. Intel shares are

down about 9% so far this year, while the benchmark

Philadelphia Semiconductor Index is up almost 29%.

The purchase marks another deal for Nestle boss Mark

Food group Nestle on Friday said it had bought U.S.

meal delivery company Freshly in a deal valuing it at $950

million, with further potential payments or “earnouts” of

up to $550 million.

Private equity groupInspire Brandsto buy Dunkin'in $11.3 billion deal

Nestle buys U.S. mealdelivery group Freshly


Intel agrees to sell storageunit to SK Hynix $9 billion

Intel Corp. agreed to sell its Nand memory unit to South

Korea's SK Hynix Inc. for about $9 billion, part of a broader

effort by the U.S. chipmaker to concentrate on its main

business.


M&A


“Consumers are embracing ecommerce and eating at

home like never before. It's an evolution brought on by

the pandemic but taking hold for the long term,” Nestle

USA head Steve Presley said in a statement.

Under Schneider, the world's largest packaged food

group has been moving into faster-growing areas like

premium coffee and pet food and away from slower

categories like mass market candy and bottled water.

Nestle acquired a minority stake in Freshly in 2017, as the

lead investor in a $77 million funding round.

Schneider, who has bought and sold around 50

businesses since taking over in 2017.

Freshly is a weekly subscription service delivering

cooked meals that can be heated in three minutes. Nestle

said Freshly's 2020 sales were forecast at $430 million

and it ships more than one million meals per week.

Other players in the food delivery market include meal kit

companies HelloFresh and Blue Apron Holdings and

takeaway food groups Delivery Hero and Just Eat

Takeaway.

Nikkei said.

It bought Funimation Productions Ltd, an animation

distributor with one million paying subscribers, for about

$143 million in 2017.

Sony is beefing up gaming and entertainment

businesses under Chief Executive Kenichiro Yoshida's

strategy to increase recurring revenue streams that

cushion the impact of volatile hardware sales cycles.

Sony, which recently obtained exclusive rights to

negotiate for Crunchyroll, hopes to leverage the new

channel to distribute its own entertainment content,

including films and music.


Sony in talks with AT&Tto buy Crunchyroll for morethan $950 million: Nikkei

The acquisition would give Sony access to Crunchyroll's

70 million members around the world, allowing the

Japanese entertainment and electronics conglomerate

to compete better with Netflix and other global rivals, the

Sony Corp is in final talks with AT&T to acquire U.S.

animation-streaming service Crunchyroll in a deal worth

more than 100 billion yen ($957 million), the Nikkei

business daily reported on Friday.

ConocoPhillips buying Conchoin $9.7 billion all-stock deal

The transaction brings together the companies' acreage

positions across the Delaware and Midland basins and

includes positions in the Eagle Ford and Bakken in the

Lower 48 and the Montney in Canada. Its position in the

Permian Basin will be expanded. The deal is expected to

close in the first quarter of next year.

ConocoPhillips is buying shale producer Concho

Resources in an all-stock deal valued at $9.7 billion.

Concho's common stock will be exchanged for a fixed

ratio of 1.46 shares of ConocoPhillips shares.

The combined business will have an enterprise value of

approximately $60 billion and a combined resource base

of approximately 23 billion barrels of oil equivalent. The

companies said Monday that the combined business will

be the largest independent oil and gas company, with pro

forma production of more than 1.5 million barrels of oil

equivalent per day.


M&A


Prosus CEO Bob van Dijk said the company had looked at

other options, including spending money on new large

acquisitions but found buying back its own shares a

better deal, pointing to the discount.

Prosus said it would buy-back up to $1.37 billion of its own

stock and up to $3.63 billion of Naspers' shares on the

open market in a proposed transaction it expected to

launch following the release of its interim results on Nov.

23.

Naspers has long been trying to narrow the discount

between its stock price and that of its underlying assets,

and it listed Prosus separately in Amsterdam as part of

those efforts last year. It retains a 72.6% stake in Prosus.

Prosus owns a 30.9% stake in Asia's online soware and

payments giant Tencent worth nearly 200 billion euros at

Thursday's closing price. Prosus's own value was just 135

billion euros as of Thursday's close, including other

investments in online classified, payment and food

delivery businesses.

Dutch technology investor Prosus said on Friday it

would buy back up to $5 billion in its own and South

African parent Naspers' shares, as part of efforts to

narrow a discount between the companies' share prices

and underlying assets.

“Utilising cash to own more of our current portfolio

through a purchase of our own shares - when the

discount to NAV (net asset value) is sizeable - is a

sensible use of capital,” he said in a statement.

Prosus to buyup to $5 billion inits own, Naspers

shares

Siemens had been talking to buyout groups Triton,

Carlyle, CVC and Brookfield, as it looked to offload Flender.

Siemens had originally considered a spin-off and public

listing of Flender business, but said an outright sale

offered a quicker solution.

Siemens has agreed to sell Flender to U.S. buyout

group Carlyle Group in a deal valuing the mechanical

drives business at 2.025 billion euros ($2.39 billion), the

German engineering group said on Thursday.

The sale is the latest step in Siemens's attempts to slim

down its business to focus on factory automation,

transportation, and smart buildings aer floating its

turbines and generators supplier Siemens Energy last

month and spinning off its Healthineers division in 2018.

The deal is expected to close in the first half of 2021, with

Siemens using the proceeds to strengthen its balance

sheet. Flender, which was part of Siemens so-called

portfolio companies, was profitable but no longer seen as

a key part of the German group as it focuses on industrial

technology.

“Our plan of fixing the businesses ourselves by

introducing the structures used in small and midsized

companies has proven effective.”

Flender, which has sales of around 2.2 billion euros and

employs 8,600 staff, supplies Winergy branded gear

boxes and generators for wind turbines, gears and

couplings for cranes, ships, oil and gas production, as well

as components for the chemicals, pharma, cement and

food industries.

Siemens bought Flender, which traces its roots back to a

19th century-maker of belt pulleys, from Babcock Borsig

in 2005. Flender has, however, not lived up to Siemens'

growth and profitability expectations.

Siemens agreesto sell Flender toCarlyle Groupin $2.4 billion deal


INTERNATIONAL NEWSCROSS BORDER NEWS

M&A


"The Board of Pidilite Industries Limited at its meeting

held on 28th October, 2020 approved a definitive

agreement with Huntsman Group (USA) for acquiring

100% stake in one of their subsidiaries in India namely,

Huntsman Advanced Materials Solutions Private Limited

(HAMSPL)," said a company statement.

Huntsman operates a 100% subsidiary in India,

Huntsman Advanced Materials Solutions, which directly

competes with Fevicol, as it manufactures and sells

adhesives, sealants and other products under brands

such as Araldite, Araldite Karpenter and Araseal in the

country.

It can be noted that Fevicol is synonymous with

adhesives to the millions here. Its other major brands

include MSeal, Fevikwik, Fevistik, Roff, Dr.Fixit, Fevicryl,

Motomax and Hobby Ideas.

Huntsman had a revenue of around ₹400 crore in 2019,

from its operations here. The Huntsman Group is a

leading global producer of differentiated organic

chemical products.

Pidilite Industries -- the manufacturers of the popular

Fevicol brand of adhesives -- has signed a definitive

agreement to acquire the US-based Huntsman Group's

Indian subsidiary for ₹2,100 crore

"The cash consideration excludes customary working

capital and other adjustments, subject to certain

preconditions being met prior to the closing of the

transaction. The deal also includes the firm's Indian

subcontinent business, apart from a trademark licence

for the Middle East, Africa and ASEAN countries, the

statement added.

Under the deal, Huntsman will receive around 90% of the

cash consideration at closing and balance around 10%

within 18 months if the business achieves sales revenue

in-line with 2019. "With this acquisition, Araldite will add to

the already very strong portfolio of our adhesives and

sealants and will complement our retail portfolio. We are

confident that this acquisition will create significant

shareholder value through strong revenue and cost

synergies," Bharat Puri, thed managing director of Pidilite

said.

Pidilite to acquireHuntsman Group'sIndian subsidiaryfor ₹2,100 crore

Australia's REA groupto acquire controlling stakein Elara Technologies

REA Group Ltd, a global online real estate company

headquartered in Melbourne, Australia has entered into a

binding agreement to acquire a controlling interest in

Elara Technologies, which owns and runs Housing.com,

PropTiger.com and Makaan.com, people aware of the

development said.

The deal that includes cash and newly issued REA shares

is expected to close in the current quarter.

REA currently holds a 13.5% shareholding in Elara, on

completion the company is expected to have a

shareholding of between 47.2% and 61.1%.

The total consideration of the transaction is expected to

be in the range of US$50-70 million, with US$34.5 million

payable out of existing cash reserves. REA has also

agreed to subscribe for US$34.5 million of preference

share in Elara to fund the repayment of 50% of Elara's

debt facility.

“India is an incredibly attractive market and one that

provides excellent long-term growth opportunities, while

complementing REA's footprint in Australia, Asia and



M&A


Elara will continue to operate as a stand-alone entity

within the REA group structure. Dhruv Agarwala, co-

founder and CEO, along with the current leadership team,

will continue to lead the company.

In January, Elara had raised $70 million from its existing

investors NewsCorp and REA group.

North America.

REA group along with News Corp, already owns a

significant minority stake in the company. The company

has raised equity capital of USD 105 million to date from

News Corp, REA Group, Elevation Capital, Sobank and

Accel, among others.

A company executive said that this is an opportune time

for the transaction given the massive acceleration in

digital adoption in all categories over the last six months

because of the COVID-19 pandemic.

The Indian real estate market is significant, with the

current market size estimated at USD 180 billion and

projected to grow at a CAGR of 19% over the next decade.

The digital real estate classifieds advertising market is

expected to grow at a CAGR of 29% until 2025, which

provides the opportunity to build a big and profitable

business.

to acquire Blue Acorn iCi - a digital customer experience,

commerce and analytics services provider - for up to USD

125 million (about Rs 915 crore).

The acquisition was undertaken by Infosys Nova

Holdings, LLC, a wholly-owned subsidiary of Infosys.

"This acquisition further strengthens Infosys' end-to-

end customer experience offerings and demonstrates its

continued commitment to help clients navigate their

digital transformation journey. Blue Acorn iCi brings to

Infosys, significant cross-technology capabilities

through the convergence of customer experience, digital

commerce, analytics, and experience-driven commerce

services," Infosys said in a statement on Wednesday.

This acquisition further deepens Infosys' capabilities in

the Adobe, Magento, Salesforce Commerce and Shopify

ecosystems, it added.

Infosys completesacquisition of digital serviceprovider Blue Acorn iCi

Infosys had, earlier this month, announced inking a pact

IT services firm Infosys on Wednesday said it has

completed the acquisition of Blue Acorn iCi.

Tech Mahindra acquiresMomenton and Tenzing toboost financial services biz

IT services company Tech Mahindra on Tuesday said it

acquired 100% equity in two companies—Momenton, a

digital enterprise technology firm and Tenzing Ltd, a

technology consulting firm. Both organizations are

expected to help Tech Mahindra enable digital

capabilities, modern cloud-based architecture and

transformation for customers in the Australia and New

Zealand region in financial services and other sectors.

The acquisition of Momenton, for $10.2 million, is

expected to be completed by March 2021 while that of

Tenzing, for $29.5 million, is expected to completed by

November this year.

“The acquisition of Momenton and Tenzing Ltd are in line



M&A


with our strategy to strengthen our digital capabilities,

and offer our clients end-to-end transformation services.

This will significantly enhance our local presence in the

markets, and the combination will create significant

synergies and help in bringing next generation solutions

to customers enabling them to run better, change faster

and grow greater," said Vivek Agarwal, global head for

healthcare and financial services, Tech Mahindra.

Momenton is a Melbourne-based digital enterprise

t e c h n o l o g y fi r m o ff e r i n g c o n s u l t a n c y a n d

implementation services in enterprise agility, product

enablement, engineering and emerging technology to

clients across industries, with advanced capabilities in

digital engineering and cloud native architectures.

Tenzing is a management and technology consultancy

offering business strategy, insurance core system

transformation, program management, target operating

model design across industries and public sector

organizations. The acquisitions underline Tech

Mahindra's focus on digital growth under the TechMNxt

charter, which focuses on leveraging emerging

technologies and solutions for digital transformation.

information.

The pandemic is accelerating moves by global banks and

financial services firms to shed their captive technology

centers. Tata Consultancy's potential takeover of

Postbank's 1,400 employees in the South Asian nation

will help Deutsche Bank Chief Executive Officer Christian

Sewing get closer to his job-cuts target.

Negotiations are ongoing and could still be delayed or fall

apart, the people said. A Deutsche Bank spokeswoman

declined to comment, while a representative for Tata

Consultancy also didn't comment.

Deutsche Bank also recently unveiled a plan to move

much of its IT into the cloud as part of a deal with

Alphabet Inc.'s Google. The bank said in July it expects to

sign the contract with Google “within the next few

months."

Tata Consultancy, which has more than 450,000

employees across the world, in 2008 paid $505 million to

acquire Citigroup Inc.'s back-office unit in what was then

its biggest acquisition. Financial details of the proposed

transaction with Deutsche Bank aren't known.

Deutsche Bank is currently merging Postbank's IT with

its own, which is expected to render the services provided

by PB Systems obsolete by the end of next year. The

plan, known internally as Project Unity, is expected to

contribute the lion's share to Sewing's goal of cutting 1

billion euros of expenses in the German retail operations.

PB Systems generated 533 million euros ($632 million) in

revenue in 2015, according to its latest available annual

report. The unit provides IT services to Deutsche Bank's

formerly separate retail unit Postbank.

Deutsche Bank's Sewing last year unvei led a

restructuring plan centered on cutting 18,000 jobs, with

about half of those expected in Germany, Bloomberg

News has reported.

TCS in talksto buy Deutsche Bank'stechnology unit

Tata Consultancy Services Ltd (TCS), Asia's biggest

soware exporter by market value, is in advanced talks

to acquire a technology services unit of Deutsche Bank

AG, people with knowledge of the matter said.

The discussions about the Bonn-based Postbank

Systems AG are expected to result in a deal with the

Indian company by the end of the year, the people said,

asking not to be identified discussing the private


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