MA Overview Case Studies November 2015 Vijay Gupta

M&A Overview & Case Studies November 2015 Vijay Gupta ACMA, FCS, FCA

Abstract from Lecture delivered by Mr. Justice S H Kapadia, Hon’ble Chief Justice of India on 20 th February 2010 at ITAT Conference � Start: “But friends, let me tell you about whatever I have learnt; in fact I became a judge precisely because I was very keen to have a learning process. I always realized that this is a position where if a judge sits with an open mind and with clarity of thought, he will understand he will learn in the process and I can tell you from experience that each day, in whatever jurisdiction you sit, it’s a learning process and there I may say that be judges or members of the Tribunal, we are all enjoying a reflected glory of the advocates who have contributed to a large extent in the development of tax law. ” End: “I always believe that instead of going into theories and principles, etc. , it is better that we share experience in such workshops and seminars. And last thing I would like to say is, please do not put an and to the efforts here. It is a continuing process. ”

M&A– Domestic/ Cross Border (Illustrative) Business Restructuring � Merger/ Amalgamation � Demerger � Merger through BIFR � Conversions of Companies to LLP/ of Partner Firm/Prop. Concern to Company; Chapter XXI registration of Partnership firms � Revival & Rehabilitation of Sick Companies � Liquidation of Companies/ Defunct Status � Family Settlement (via CLB route as well) Acquisitions Shares/Assets Capital (Re)Structuring � Assets/Business Purchase – Slump Sale/ Itemized Sale � Share Purchase � Joint Venture/ Strategic Alliance/ Partnership � Takeover/ Public Offer � Management Buy Out � Leveraged Buyout � Foreign Portfolio investments � Buy Back of Shares � Capital Reduction � Variation of Shareholder’s Rights � Preferential Issue of shares � Financial Restructuring � Corporate Debt Restructuring � Bonus Debentures/ Bonus Redeemable Preference Shares Divestment � Demerger/ Spin Off � Splits � IPOs � Merger with listed Entity � Listed NCDs of unlisted private limited & limited companies

Mergers and Acquisitions M&A (Mergers and Acquisitions) are methods by which distinct businesses may combine – Structure/Restructure itself. Joint ventures are another way for two businesses to work together to achieve growth as partners in progress, though a joint venture is more of a contractual arrangement between two or more businesses. Articles of Association of the joint venture company would incorporate agreement between the joint venture parties.

Restructuring and Value Creation Corporate Restructuring: At the enterprise level, restructuring could mean a change in the investment structures, financing structures, operating structures or governance structure of a company or any combination of these parameters. Value Creation: Value creation in simple words refers to improvements in the return on investment (of share holders) by increasing the cash inflows and reducing risks. Value is created when an organisation is able to improving operating efficiency and achieve profitable growth and rationalise & exit unrewarding business by liquidating unproductive capital and curtailing investment in unrewarding projects.

MERGERS AND AMALGAMATIONS ‘Merger’ is not defined under Companies Act, 1956/2013 or any other Indian law. Merger and Amalgamation are used synonymously. Sections 390 to 394 of Companies Act 1956 (230 to 240 of Companies Act 2013) deal with the analogous concept of schemes of compromise or arrangement between a company, it shareholders and/or its creditors i. e. any kind of Compromise, Arrangements and Reconstructions. A merger is a combination of two or more distinct entities into one. Assets and liabilities of a company (merging company) are vested in another company (merged company). The merging entity loses its identity and its shareholders become shareholders of the merged company. Amalgamation is an arrangement, whereby the assets and liabilities of two or more companies (amalgamating companies) become vested in another company (the amalgamated company). The amalgamating companies all lose their identity and emerge as the amalgamated company; though in certain transaction structures the amalgamated company may or may not be one of the original companies. The shareholders of the amalgamating companies become shareholders of the amalgamated company.

Amalgamation Transaction Shareholders of Transferor Co Shareholders of Transferee Co Consideration in the form of shares of Transferee Co Transferor Co (Amalgamating Co) Merger Transferee Co (Amalgamated Co) Resultant Structure Shareholders of Transferor Co (Dissolved) Shareholders of Transferee Co (Merged Entity)

Demerger Meaning • Involves transfer of identified business from one company to another Transaction Shareholders of Transferor Co Consideration in the form of shares of Transferee Co • In consideration, the company which acquires the business issues shares to shareholders of the transferor company • Demerger is a Court driven process similar to merger (4 6 months) Transferor Co (Demerged Co) Demerger of Business B Business A Business B Transferee Co (Resulting Co) Resultant Structure Shareholders Transferor Co (Demerged Co) Transferee Co (Resulting Co) Business A Business B

DEMERGERS A demerger is opposite of merger, involving splitting up of one entity into two or more entities. An entity which has more than one business, may decide to ‘hive off’ or ‘spin off’ one of its businesses into a new entity. The shareholders of original entity would generally receive shares of the new entity. If one of the businesses of a company is financially sick and the other business is financially sound, the sick business may be demerged from the company. This facilitates the restructuring or sale of the sick business, without affecting the assets of the healthy business. Conversely, a demerger may also be undertaken for situating a lucrative business in a separate entity. A demerger, may be completed through a court process under the Merger Provisions, but could also be structured in a manner to avoid attracting the Merger Provisions. Dalmia Cement (Bharat) Limited, Dalmia Bharat Enterprises Limited, Avnija Properties Limited, DCB Power Ventures Limited Cement, Refractory, Thermal Power Plant Asian Hotels Limited into Delhi, Kolkata, and Mumbai Avantha/Thapar Group for family settlement Bajaj. Group/ Family alignment

Concept of Slump Sale Ingredients – Section 2(42 C) • Transfer • One or more undertakings Consideration Company Y Company X • Going concern basis Slump sale Division A • Lump sum consideration (without values being assigned to the individual assets and liabilities) Division B • Consideration received by Seller and not shareholders Explanations • Undertaking – 2(19 AA) even part included/ should constitute business activity • Valuation for stamp duty purposes would not affect transaction being treated as slump sale ‘Undertaking’ – Ingredients • Going concern • Integrity of the business Computation provision – Section 50 B

Asset Sale/ Itemized Sale Consideration Company X Company Y • Meaning – Sale transaction that does not satisfy the definition as Slump Sale • Values attributed to individual assets • Tax implications for Seller: − Capital gains on transfer of non depreciable assets: • Capital gains = Sale consideration – Cost/ Indexed Cost of acquisition • Long term CG: 20% • Short term CG: 30% Asset sale Assets − − Capital gains on transfer of depreciable assets: • Capital gains = Sale consideration – WDV of the block of assets • Gains always regarded as Short Term Business Assets, including stock, etc. • Business income taxable at 30%

Stock/ share acquisition Structure 1 A – Cash consideration Existing Shareholder(s) Cash Acquirer company Transfer of shares Acquirer company a f sh eo u Target company Structure 1 B – Share exchange Shareholder(s) of Acquirer company Issue shares of Acquirer Co Transfer Shares of Target Co Target company Existing Shareholder(s) Iss Target company Shareholder(s) of Target company Structure 2 – Preferential allotment Acquirer company Cash infusion

The Acquisition Process (Courtesy: ICAI Study Material) The acquisition process involves the following essential state: I. Defining the Acquisition Criteria II. Competitive analysis III. Search and screen IV. Strategy development V. Financial evaluation VI. Target contact and negotiation VII. Due diligence (in the case of a friendly acquisition) VIII. Arranging for finance for acquisition IX. Putting through the acquisition and Post merger integration

Role of CAs As CFO, Financial Advisor or Investment banker (being CA professional) & even as a Practicing CA, CA plays a key role in supporting M&A structure. Identifying an opportunity Structuring Successful execution Completion of transaction Post Structuring Issues Deal documents are drafted by Legal Advisor/Merchant Banker/Consulting Firm/Accounting Firm but Implications & Essence are well understood by CA. CA must keep in mind Commercial considerations behind the strategy.

Pinky Journey: from First Woman Officer to 1 st Woman CFO at Birlas � As she mastered the intricacies of tax laws, a new wave of opportunity came about in the form of mergers and acquisitions in late 1990 s. � As Kumar Mangalam Birla was expanding the empire through acquisitions, Mehta was part of the team that structured the acquisition of Madura Garments, a transaction that transformed the group from a pure commodity player to a consumer centric conglomerate. � “It gave me enough exposure to the art of settling shareholder agreements. And it also helped me understand the importance of doing due diligence in a deal of such magnitude, “ said Mehta, who saw a string of assignments coming her way, including the acquisitions of Transworks, Minacs and Apollo Sindhoori. � At times, she spent hours waiting in jam packed courtrooms. During the merger of Indo Gulf and Birla Global Finance, she made several trips to appear before the court in Ahmedabad, answering point blank queries from the judges. � In 2009, Mehta was appointed as the head of the management services division, and tasked with executing many high impact projects aimed at achieving commercial excellence, knowledge integration and future forecasting. She built a multifunctional team to expand the services to group companies. “I am more of a mentor who gives directions. I also learn a lot from youngsters, “ said Mehta, adding that she did not wear the hat of a hard taskmaster.

Prominent M&A deals in India Indicative only Domestic Outbound deals Inbound deals �Reliance Industries Limited buys 95% stake in Infotel Broadband Services Limited �Hero Investments buys 26% of Honda Motors in Hero Honda Motors (Hero Moto. Corp); PE funding into Hero Investments as Investing Company �Sesa Goa Vedanta Sterlite Cairn India MALCO �Shriram Transport/Finance acquired partly by Piramal �Tech Mahindra Satyam �United Breweries – Scottish & New Castle India �TV 18 Broadcast Ernadu Television Network, by Reliance Industries Limited �Hindustan Unilever – Unilever PLC – Buy back of shares �Aditya Birla Group’s US based Columbian Chemicals; and Canadian based Novelis �Tata acquisition of UK’s Corus; Tetley; UK’s Jaguar Land Rover �HCL’s acquisition of Axon �Bharti Airtel’s acquisition of Zain’s African’s assets �ONGC Videsh Ltd. ’s acqiusition of Hess Corporation’s stake in Azeri, Chirag and Guneshli group of oilfields �Infosys Ltd’s acquisition of Lodestone Holdings AG �Vodafone buys majority stake in Essar Telecom; & now 100% in Vodafone India �Mylan Laboratories Inc acquiring Agila Specialities & Other pharma companies �Volvo acquiring 50% in Eicher Commercial Vehicle �PE funds acquiring stake in GMR Infrastructure �Abbott’s acquisition of healthcare business of Piramal Healthcare �NTT Docomo’s acquisition of stake in Tata Teleservices Ltd. �Telenor’s acquisition of stake in Unitech Wireless �Ethihad Airways acquisition of 24% stake in Jet Airways �Vedanta acquisition of Cairn India Limited �Warburg Pincus – Future Capital Holdings

Types of Mergers…. 1/2 Horizontal Mergers ‘Horizontal integration’ between entities engaged in competing businesses which are at the same stage of the industrial process. Reliance Industries/IPCL/ONGC Vertical Mergers Vertical integration: Combination of two entities at different stages of the industrial or production process. For example, the merger of a company engaged in construction business with a company engaged in production of brick or steel. DLF/DLF Cement Congeneric Mergers Between entities engaged in same general industry and somewhat interrelated, but having no common customer supplier relationship. A company uses this type of merger in order to use the resulting ability to use the same sales and distribution channels to reach the customers of both businesses. Volvo Bus/Volvo Commercial Vehicles Conglomerate Mergers Two entities in unrelated industries. The principal reason for a conglomerate merger is utilization of financial resources, enlargement of debt capacity, and increase in the value of outstanding shares by increased leverage and earnings per share, and by lowering the average cost of capital. Erstwhile Reliance Industries Refinery, Power, Telecommunication, Infrastructure, Aditya Birla Novo, Vedanta Limited

Types of Mergers…. 2/2 Cash Merger ‘Cash out merger’. Shareholders of one entity receive cash in place of shares in the merged entity. Promoter Group of Eicher Motors Triangular Merger A triangular merger is often resorted to for regulatory and tax reasons. When the target merges into the subsidiary and the subsidiary survives, or reverse when the subsidiary merges into the target and the target survives. Eicher Motors/Volvo/ VE Motors Reverse Merger Profit making company acquires a sick company. Sick under BIFR, Godrej Soaps with Gujarat Godrej

ACQUISITIONS…. . 1/2 An acquisition or takeover is the purchase by one company of controlling interest in the share capital, or all or substantially all of the assets and/or liabilities, of another company. A takeover may be friendly or hostile purchase of shares from open market, or by making an offer for acquisition of the offeree’s shares to the entire body of shareholders. Friendly takeover Negotiated takeover, acquisition of Target Company through negotiations between the existing promoters and prospective investors. Daiichi Sanyo of Ranbaxy; Sun Pharma of Ranbaxy, Hindalco of Novelis, Canada, Thomas Cook of Sterling Holiday, Reliance of Network 18 Hostile Takeover If the board rejects the offer negotiated offer, but the bidder continues to pursue it or the bidder makes the offer without informing the board beforehand. Cairn India by Vedanta Group ITC vis à vis Reliance in Oberoi Hotels (Hostile vis à vis Friendly) Leveraged Buyouts Acquisition is funded by borrowed money. Often the assets of target company are used as collateral for the loan. This is a common structure when acquirers wish to make large acquisitions without having to commit too much capital, and hope to make the acquired business service the debt so raised. Tata/Corus/Tata Tetley/Jaguar/ LT Foods

ACQUISITIONS… 2/2 Bailout Takeovers Profit making company acquires a sick company. This kind of takeover is usually pursuant to a scheme of reconstruction/rehabilitation with the approval of lender banks/financial institutions. Sick under BIFR Slump sale Acquisitions of assets and liabilities of the target on a going concern basis, i. e. without attributing specific values to each asset / liability, but by arriving at a valuation for the business as a whole. Commercial vehicle business of Eicher Motors into Volvo JC company, Cement undertaking of Jay. Pee into Birla Cement; ‘Jet Privilege Frequent Flyer Programme’ of Jet Airways to Jet Privilege Pvt. Ltd. Agreements providing the acquirer with voting rights or board rights To acquire a greater degree of control in the target than what would be associated with the acquirer’s stake in the target, e. g. , the acquirer may hold 26% of the shares of the target but may enjoy disproportionate voting rights, management rights or veto rights in the target. Reliance into Oberoi Hotel; Reliance into TV 18/Netwotk 18

Forms of Payment Cash (including highly marketable securities) Stock Equity Preference Convertible Instruments Redeemable Instruments Debt Secured Unsecured Convertible Purchase Price Adjustments (Working Capital) Real Property Real Estate Plant and Equipment Business or Product Line Performance Related Earn Outs Rights to IPRs License Franchise Royalties from Licenses Franchises Fee Based Consulting Contract Employment Agreement

Selection of transaction structure Repatriation Dividend Royalty Interest Fees for Technical Services Capital Gains Management fees

The Best Deals of 2014 One Big Surprise Sun Pharma Ranbaxy Laboratories � Soft spoken Dilip Shanghvi is known to drive hard bargains. The founder and MD of Sun Pharma hunts for cash starved companies, buys them at low valuations and turns them around. Even with this reputation, investors were surprised when he announced an all stock deal to purchase Ranbaxy Laboratories. Shanghvi paid a tad under $ 3 billion (Rs 17, 275 crore) to buy Ranbaxy lock, stock and barrel. Earlier, in June 2008, Japanese drug maker Daiichi Sankyo had bought a 63% stake at a valuation of about $6. 4 billion. � Since the deal was announced in April 2014, share prices of Sun Pharma have gained 38%, adding about Rs. 46, 000 crore to its market value. The BSE Sensex gained 21% during the same period. � The acquisition was one big reason why the jury for the ET Awards for Corporate Excellence picked Shanghvi as the Business Leader of the year. � But the upside can't be ignored either. The acquisition will help Sun Pharma overtake Abbott Laboratories as the largest drug maker in India. Sun Pharma will become a force to reckon with in the domestic, emerging markets and very likely on the global canvas, too. � The deal will also change the consolidated revenue mix. Local revenues contributed 34% of Sun's revenues, while rest of the world primarily, the US and some parts of Europe contributed 64%. After the deal, the mix will be closer to 50: 50. � Sun Pharma believes it will realise $250 million in merger related synergies in three years. But first, Ranbaxy still needs to resolve a host of cases that Ranbaxy is facing from the US FDA.

The Best Deals of 2014 Patience Pays Off JSW Energy JP Power Ventures � It was third time lucky for Jaiprakash Power Ventures. But for Sajjan Jindal, who was the first suitor for the former's power assets, his patience finally paid off. � JSW Energy eventually acquired Jaiprakash Power Ventures' two flagship hydropower plants Baspa and Karcham Wangtoo in Himachal Pradesh for about Rs. 9, 700 crore. � Interestingly, Jindal initially approached Jaiprakash honcho Manoj Gaur with an ambitious Rs. 37, 000 croremerger between JSW Energy and Jaiprakash Power Ventures. He was rebuffed at first. Gaur subsequently talked to Abu Dhabi's Taqa, Anil Ambani and even Gautam Adani, before coming back to shake hands with Jindal. � After many years, this deal marked the first of the big consolidation in the energy sector. � Before the deal, JSW Energy had a capacity of 3, 140 MW with aspirations to scale it up to close to 12, 000 MW. With the buy, JSW has became the largest private sector hydel power producer with 1, 391 MW capacity. It also managed to diversify its predominantly fossil fuel powered power business. Its aggregate installed and operational power generation capacity jumped to 4, 531 MW.

The Best Deals of 2014 Leveraging Each Other's Strengths Tata Power ICICI Venture � When skills and money come together no problem is unsolvable eventurning around troubled power plants that have been short circuited by regulatory uncertainties, fuel supply disruptions, low demand high debt. That's the premise on which Tata Power and ICICI Venture came together to float a Rs. 6, 000 crorefund that will make money for themselves and investors by buying out and resuscitating dying power projects. It's an unusual collaboration, but one that makes a lot of business sense. � ICICI Venture will primarily be responsible for organising both debt and equity funding for these acquisitions. Tata Power India'slargest integrated power company in the private sector willhandle the operation and maintenance of the seplants for a fee. Vishakha Mulye, MD & CEO of ICICI Venture and Anil Sardana, MD of Tata Power have been instrumental in formalising the venture. Mulye is also a member of the Tata Power board. Both partners are expected to part fund this venture with ICICI Venture taking the lead. ICICI Venture is in discussions with several leading sovereign wealth funds and global pension funds that have a long terminvestment horizon to come on board as financial partners. If the strategy works, it could earn good Ro. I for both partners. It could also help lenders recover money lent to such projects.

The Best Deals of 2014 A Win Deal Kotak Mahindra Bank ING Vysya � Three factors make the proposal to merge ING Vysya Bank into Kotak Mahindra Bank a win deal for both partners. � First, Kotak was looking to grow in scale and size, especially in southern India since half of its 500 branches are concentrated in Gujarat and Maharashtra. On the other hand, two thirdsof ING Vysya's 500 branches are predominantly down south. Now, Kotak Mahindra will have 1, 000 branches spread out evenly across the nation. It also gives Uday Kotak the scale he wants with Rs. 20, 000 crore of assets and 10 million customers. Kotak Mahindra will overtake Yes Bank to become the fourth largest private sector bank. � Second, ING has been seeking a buyer for Indian business for a while. It got one, without forgoing the India growth story it will now have a 12% stake in the merged bank. � Third, Uday Kotak had to bring down his equity stake in the bank to 30% by January 2016 and 10% by January 2018 to comply with Reserve Bank of India directions. The merger will help him prune his equity from 40% to 33. 9%.

The Best Deals of 2014 An E Commerce Powerhouse Flipkart –Myntra � Flipkart's acquisition of Myntra is unique in many ways. The Rs 2, 000 crorecash and stockdeal is one of the biggest in the e commercespace. It will help Flipkart dominate the online apparel and fashion e tailing marketin India with a market share of about 50%. � The two businesses, built by Binny and Sachin Bansal of Flipkart and Mukesh Bansal and Ashutosh Lawania of Myntra, will together have about $1. 5 billion in combined annualised sales. � This puts them far ahead of competition and makes them best placed to cash in on the coming boom in e commerce. � India's e commerce market is projected to grow seven fold to $22 billionin the next five years. It is now about $3. 1 billion. � The deal was initiated and brokered by Tiger Global and Accel Partners PE fundsthat had stakes in both the companies. � Founders of the both the companies have said that the comfort and confidence to merge the two companies came from the fact that the PE funds were a common element in both the entities. � Another unique aspect of the deal both the companies will continue to operate as separate entities and retain their individuality and DNA. � The way the deal is structured, both sets of entrepreneurs will be able to remain hands on, running the two businesses. � Until now, people have mostly sold out and left.

The Best Deals of 2014 A Strategic India Entry Le Groupe Lactalis Tirumala Milk � On the face of it, the Rs. 1, 750 croreacquisition of Tirumala Milk Products by the Rs. 1. 24 lakh crore French dairy giant Le Groupe Lactalis, should be an inconsequential matter for the latter. � But there is more to the deal. � It gives the European giant a direct entry into the world's fastest growing market, which accounts for 20% of the global milk production. India, which produces 123 million tonnes of milk worth Rs. 60, 000 crore every year, is expected to produce 190 million tonnes by 2015. Industry analysts forecast a compounded annual growth rate of about 13% 15% until fiscal 2019 20. � “India is a country with huge opportunities for Lactalis. This is our first step and it is an important step. It will expand in other parts of the country, “ its spokesperson had said at the time of acquiring the Rs. 1, 427 crore Tirumala Milk Products. � Globally, family owned. Lactalis has powered ahead through acquisitions. It will seek deeper penetration of the Indian dairy market which is dominated by Amul brand. � Expect some Lactalis brands like Sorrento, Galbani, Bridel, President, Rachel's Organic and Valmont to find their way into India soon. � Lactalis earns 34% of its income from cheese products and is expected to try and capitalise on this segment in India. � Indian cheese consumption among the affluent middle class is growing. � But, the most immediate winner from the deal was private equity fund Carlyle Asia Growth Capital, an investor in Tirumala Milk Products. It made a seven fold return on its investment in only three years.

The Best Deals of 2014 A Good Precedent for Bad Loans JM Financial Hotel Leela Venture � When Nimesh Kampani controlled. JM Financial's asset reconstruction company took over the debts of Hotel Leela Venture from its lenders in June 2014, it created a trend that will drive restructuring going forward in 2015. � Hotel Leela Venture had borrowed money from 14 banks. In a first of its kind transaction, JM Financial Asset Reconstruction Company (JMFARC) took Rs. 4, 100 crore of debts off the banks' books and on to its own. � The transaction was unique since J M made upfront cash investment of Rs. 865 crore amounting to more than 20% of the total consideration a key determining factor that persuaded banks to close the deal. � With 95% of Hotel Leela Venture's borrowings now consolidated with one lender, it was easier to bring in better control and a focussed approach towards resolution to create a win situation for all the stakeholders involved. � “JMFARC's focus has always been on single credits and cash transactions to ensure effective resolution of accounts. This was the kind of opportunity JMFARC was targeting, “ says Anil Bhatia, MD & CEO, JMFARC. “The deal drivers were an operating company, eight marquee hotels across India, good security cover and availability of non coreassets making it a strong case for revival through restructuring, “ he adds. � With the Indian banking system grappling with a high level of NPAs, it is the need of the hour that banks offload large NPA accounts to ARCs. This is a trend setting transaction for the industry. With a precedent transaction now, industry experts say similar accounts will be collectively sold by banks to ARCs in the future.

The Best Deals of 2014 Friends and Partners Piramal Shriram Group � Piramal Group chairman Ajay Piramal and Shriram Group founder R Thyagarajan are like chalk and cheese. � Piramal scaled up a family ownedenterprise scaled up through acquisitions, while Thyagarajan built his business from scratch. The former followed a policy of build and sell, the latter knew only one way to do business build. � But in the past 20 months, the duo have created a beautiful personal chemistry that is strong enough to clear any apprehensions that may come in the way of what is a complex commercial arrangement. � Piramal started investing in several businesses of Shiram Group including truck finance, the holding company Shriram Capital, Shriram City Union Finance, the consumer loan business, effectively pumping in close to Rs. 4, 500 crore and gaining entry into the length and breadth of financial services from NBFC and brokerage to insurance. � The deal helped Piramal enter the entire gamut of financial services business from non banking financial services to insurance and brokerage. � “If we he had tried to develop such a business organically, of the scale and size that Shriram is, it would have taken as much as 20 years, '' Piramal told ET. “And even then, we don't know if we would be successful. ” � Thyagarajan, who had transferred all his shares to a trust for the benefit of his employees, was looking for a successor to take the business to the next level. “We had enough capital, but we were chasing a local partner to grow the business, '' says Thyagarajan. “Ajay was an accepted leader, not aggressive, patient, straight forward and generous. ” � Piramal took over as the chairman of Shriram Capital, the holding company, in November.

Key Legal & Regulatory Considerations Companies Act, 1956/ 2013 CA 1956: Section 391 to 394, 100; and CA 2013 Sections 23, 42, 55, 62, 68; 71, 73, 76, 179, 180, 185, 186, 188, IFRS/ Accounting Issues AS 14/Ind AS 103, Valuation Income Tax Amalgamation; Asset sale / Slump sale; Transfer of shares; Demerger or spin off; Transfer Pricing; Overseas Tax; Jurisdiction; Corporate tax; Dividends and Share Buy Back; Capital Gains; Interests, Royalties & Fees for Technical Services; Withholding Taxes; Personal Income Tax; Double Tax Avoidance Treaties; Anti Avoidance; Lo. B; POEM; Valuation; BEPS, Disallowance u/s 14 A for exempt income; Sec 56 (2) income Gifts Exchange Control Regulations FDI Regulations; Overseas Direct Investment; Valuation; Approval of RBI/FIPB/CCEA SEBI & Stock Exchange/ Listing Agreement Takeover Code, SEBI Approval for Court Scheme, Listing Obligations and Disclosure Regulation 2015, Issue of Capital Disclosure Regulation, Open Offer, Delisting, Prohibition of Insider Trading Regulation 2015 Licences & Permissions Sector Specific Regulations Defence, Tele Communication, Insurance, Private Security, Print Media, Broadcasting, Pharma etc. Sector Specific Laws Financial Services (banking, non banking financial services) RBI/DNBS; Infrastructure (highways, airports); Approval of Regulator; SEBI; IRDA; TRAI Stamp Duty On Merger/ Demerger/ conveyance or transfer of movable or immovable property; Slump Sale Agreement; On transfer of shares 0. 25%; On Shareholder Agreement/ JV agreement; On Share Purchase Agreements; Shifting of Registered Office; On Conversions into LLP/Company Competition Commission of India Regulations/Approval NBFC/ Core Investment Companies Indirect Tax/ Central Sales Tax/ VAT/ Service tax/ CENVAT/ Customs Duty Aviation,

Companies Act 1956/2013 CA 1956: � Sec 391 to 394 (Corresponds to 230 of CA 2013): Merger or Compromise, Arrangement, Re organizations, Amalgamations � Sec 100 (Corresponds to 68 of CA 2013): Reduction of Share Capital CA 2013: � 23: Public offer, private placement � 42: Private placement � 62: Preferential Allotment, Rights Issue, ESOP � 55: Preference Shares � 68: Buy back of own security � 71: Debentures � 73, 76: Deposits for Public, Shareholders, Directors � 179: Power of Board � 180: Restriction on Power of Board � 185: Loan & investment to companies and person � 188: Related party transactions

Income Tax Act, 1961 Recognizes: �Amalgamation (i. e. a merger which satisfies the conditions) � Slump sale/asset sale � Transfer of shares � Buy Back of share � Demerger or spin off Tax on Capital Gains If a merger or any other kind of restructuring results in a transfer of a capital asset, it would lead to a taxable event. Capital gains tax implications Amalgamating company Shareholders of the amalgamating company Long term and short term capital gains Capital gains tax implications for demergers Capital gains tax implications for a slump sale Capital gains tax implications for an asset sale (itemized sale) Tax rates for capital gains on transfer of shares Tax holiday benefits/ Allowability of amalgamation expenses/ Carry forward of losses of transferor company Conversion of sole proprietary entity into a company Conversion of partnership firm into a company Transfer of assets between holding company and its wholly owned subsidiary Conversion of private limited/unlisted public company into LLP Tax on business income Carry forward of losses Section 79; and 72 A Tax clearance certificate Section 281: Certain transfers to be void

Definition of Amalgamation u/s 2(1 B) of IT Act "Amalgamation", in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that: (i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation ; (ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation ; (iii) shareholders holding not less than three fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first mentioned company.

Key steps – merger (Unlisted Co. ) 1 6 File chairman’s report and petitions with the High Court Preparation of Scheme & Valuation 2 3 4 Board meetings of the companies to approve the Scheme Obtain consent letters from the shareholders and creditors Application to High Court to convene/dispense with meetings of shareholders and creditors to approve the merger 7 Follow up with Registrar, Regional Director, Tax Authorities and Official Liquidator to obtain their consent for merger 8 Final hearing at the High Court 9 Obtain Court order and filing the same with Registrar 10 5 Conduct meetings as per the orders of the High Court Allotment of shares to the shareholders of the Transferor Companies

Definition of DEMERGER u/s 2(19 AA) of IT Act Demerger: Means the transfer, pursuant to a Scheme of Arrangement under section 391 to 394 of the Companies Act, 1956 by a demerged company of its one or more undertakings to any resulting company in such a manner that – � All the property of the undertaking becomes the property of the resulting company; � All the liabilities relatable to the undertaking becomes the liabilities of the resulting company; � Transferred at values appearing in its books of account immediately before the demerger; � Resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis; � Shareholders holding not less than three fourths in value of the shares in the demerged company (demerger, or by a nominee for, the resulting company or, its subsidiary) become shareholders of the resulting company; � Transfer of the undertaking is on a going concern basis.

Key steps – demerger (Unlisted Co. ) 1 Preparation of Demerger Scheme & appointment of Valuers 5 6 2 Board meetings of the companies to approve the Demerger Scheme 7 3 Preparation and finalisation of application and other documents to be filed with the High Court 8 File petitions with the High Court Filing of petition with the RD, ROC and tax authorities Follow up with RD, ROC and tax authorities to obtain their consent Final hearing at the High Court 4 Filing of application with High Court to convene/dispense with meetings of shareholders and creditors to approve the demerger 9 Obtain Court order and filing the same with ROC

Definitions Sec. 2(42 C): “Slump Sale” is defined as the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. � ‘Undertaking’ shall include any part of an undertaking, or an unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity. � Determination of value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. Sec. 50 B: Computation of capital gain in case of Slump sale “Item wise Sale” can be of two types: a) Where entire business undertaking is transferred as a going concern & consideration is fixed for each asset & liability separately. b) Where individual assets or liabilities are transferred at a price fixed for each asset or liability separately. Sec. 50: Computation of Capital Gains of Depreciable Assets Sec. 50 C: Value of Consideration as Stamp Duty Valuation

Tax Implications – Capital Gains • Capital Gains = Sale consideration – “Tax” Net Worth • Long Term Capital Gains, if undertaking is held for more than 36 months • Tax rate: − Long term capital gains: 20% − Short term capital gains: 30% • No indexation benefit • Domestic transfer pricing implications not applicable to Slump Sale? ! • WDV of assets need to be reduced from the Seller’s books Tax WDV of depreciable assets Plus Net Worth of the Undertaking Book Value of other assets Minus Book Value of all liabilities Section 50 B and 50 C are mutually exclusive. 50 C applicable where immovable property is transferred separately

Purchase Price Allocation – Buyer Perspective Purchase Price Tangible Assets Intangible Assets 1 Identifiable Intangible Assets 2 Unidentifiable Intangible Assets Goodwill Residual Amount • No specific guidelines available for accounting • Reference in AS 10 – Apportionment of value on a fair value basis • Allocation towards identifiable tangibles and intangibles • Balance consideration treated as goodwill 3

Other Implications VAT Implications • Business on a going concern basis not regarded as ‘goods’ • No VAT/ CST implications • VAT credit pertaining to division sold can be transferred to Buyer Stamp Duty • Stamp duty leviable on instrument conveying/ transferring ownership – Conveyance • No stamp duty on transfer of movable assets by delivery • Alternate approach – Transfer pursuant to an ‘Agreement to Sell’ − It is at best an intent to transfer on a future date • Closing mechanism • Transfer of land, IP and Actionable Claims • Slump sale through a Scheme of Arrangement – High Court Process

Sec 72 A – Specific Provision – Amalgamation Available to Losses covered • Company owning an industrial undertaking, ship, hotel • Banking company • Public sector engaged in the operations of aircrafts business • Business (cash) losses • Unabsorbed depreciation • • • Manufacture or processing of goods • • • Telecommunication services Industrial Undertaking Manufacture of computer software Business of generation or distribution of electricity or any other form of power Mining Construction of ships, aircrafts or rail systems ITES Companies – Industrial Undertaking Fresh Lease of 8 years for Business Losses

Conditions to be satisfied – Amalgamation Amalgamating Company Amalgamated Company • Engaged in the business for 3 or more years in which the accumulated loss has occurred and depreciation remains unabsorbed • Held 3/4 th of the book value of fixed asset for 2 years prior to the date of amalgamation • Holds 3/4 th of the book value of fixed asset for 5 years from date of amalgamation • Continues business of amalgamating company for at least 5 years from the date of amalgamation • To achieve production of at least 50% of the installed capacity of the undertaking before the end of 4 years from the date of amalgamation and to maintain the said minimum level till the end of 5 years from the date of amalgamation (Rule 9 C)

Sec 72 A – Specific Provision – Demerger Allowability • Loss and unabsorbed depreciation directly relatable to the demerged undertaking • In case loss and unabsorbed depreciation is not directly relatable to the demerged undertaking, loss and unabsorbed depreciation to be apportioned in the ratio of assets retained and assets transferred Definition of “industrial undertaking” not applicable No fresh lease of life available in case of demerger

Sec 79 – Change in substantial shareholding • Carry forward and set-off of loss Where in any year a change in shareholding of a company (in which public are not substantially interested), then no loss incurred prior to the year of change shall be carried forward and set off if: – On the last day of the previous year the shares of the company carrying not less than 51% of the voting rights are held by persons who held at least 51% of the shares of the company on the last day of the year in which the loss had incurred • Change in the shareholding of an Indian company which is a subsidiary of a foreign company due to amalgamation or demerger of the foreign company subject to the condition that 51% of the shareholders of the amalgamating or demerged foreign company continue to be shareholders of the amalgamated or resulting company • Carry forward and set off of unabsorbed losses permissible even if shareholding changes by more than 49%, as long as there is no change in control Exception The Karnataka High Court (HC) in the taxpayer’s case has held that it would be entitled to carry forward and set-off unabsorbed losses even though immediate shareholding had changed by more than 49%, so long as there is no change in control.

Certain transfers to be void – Section 281(1) Where, during the pendency of any proceeding under this Act or after the completion thereof, but before the service of notice under rule 2 of the Second Schedule, any assessee creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise : Provided that such charge or transfer shall not be void if it is made (i) for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee; or (ii) with the previous permission of the Assessing Officer. Explanation. —In this section, "assets" means land, building, machinery, plant, shares, securities and fixed deposits in banks, to the extent to which any of the assets aforesaid does not form part of the stock in trade of the business of the assessee.

Overseas merger between foreign companies : Amalgamation of foreign company holding Indian company’s shares with another foreign company Section 47(via) specifically provides that transfer of a capital assets being shares in an Indian company by a transferor foreign company to the transferee foreign company in not a transfer for the purpose of capital gains tax if the following two conditions are fulfilled: �At least 25 percent of the shareholders of the transfer or foreign company remain shareholders of the transferee foreign company; and �Such transfer is not chargeable to capital gains tax in the country in which the transferor foreign is incorporated. Goodwill acquired on amalgamation The Supreme Court in case of Smifs Securities Limited ruled that goodwill acquired on amalgamation (that is, excess of consideration paid over value of net assets acquires) is an intangible asset under Sec. 32(1)(b) and hence eligible for depreciation claim under the Income Tax Act, 1961.

International Transactions for Transfer Pricing Explanation (i) to 92 B(1)… “(c) Capital financing, including any type of long term or short term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business; “(e) a transaction of business restructuring or reorganisation, entered into by an enterprise with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets of such enterprises at the time of the transaction or at any future date” Form No. 3 CEB International transactions of purchase or sale of marketable securities, issue and buyback of equity shares, optionally convertible/ partially convertible/ compulsorily convertible debentures/ preference shares

Buy-back of Shares after June 1, 2013 • Buy back of shares by domestic unlisted companies taxable at 20%++ • Tax will be levied on the company buy back shares on ‘Net Consideration’ • Net Consideration = Buy back consideration Less Consideration received on allotment of shares • DTAA benefits neutralized – Mauritius, Singapore structures stand nullified Particulars INR in Crs. Share Capital 100 Max. permissible buy back (25% on Share capital & Free reserve) 125. 00 Free Reserves 400 Less: Amount received at time of issue of shares (Assuming share issued at face value) 25. 00 Shareholder Funds 500 Distributed income 100. 00 Tax on buy back of shares @ 22. 66% 22. 66 Repatriation of Fund by Dividend or Buyback of Shares?

Income tax provisions 56(2)(vii)(a) 56(2)(vii)(b) An individual or a Hindu undivided family receives any shares and securities (other than from exempted categories) A firm or a company not being a company in which the public are substantially interested, receives shares of a company not being a company in which the public are substantially interested (other than in a scheme of merger, demerger etc. ) A company, not being a company in which the public are substantially interested, receives from any person being a resident, any consideration for issue of shares that exceeds the fair market value of the shares (other than by a venture capital undertaking from a venture capital company or a venture capital fund) Without consideration or a consideration which is less than fair market value – Fair value is book value/break up value Or Value as per DCF method; Or Based on the value of its assets, including intangible assets being goodwill, know how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature

Valuation Methods Indicative Asset Approach • Net Asset Value • Liquidation Value Income Approach Market Approach • Yield/ PECV • Market Price • DCF • Comparable Companies Multiples • Comparable Transaction Other Methods • Price of Recent Investment method (PORI) • Sum of the parts valuation • Weighted Average Method • Any other method accepted by RBI, SEBI or Income Tax • Any other method(s) that valuer may deem fit (with justification)

When to Use Various Valuation Methodologies Reference: ‘Merger Acquisitions and Other Restructuring Activities’ by Donald De Pamphilis 6 th Edition 2012 Discounted Cash Flow • The firm is publicly traded or private with identifiable cash flows • A start up has some history to facilitate cash flow forecasts • An analyst has a long term time horizon • An analyst has confidence in forecasting the firm’s cash flows • Current or near term earnings or cash flows are negative but are expected to turn positive in the future • A firm’s competitive advantage is expected to be sustainable • The magnitude and timing of cash flows vary significantly Comparable Companies • There are many firms exhibiting similar growth, return, and risk characteristics • An analyst has a short term time horizon • Prior, current, or near term earnings or cash flows are positive • An analyst has confidence that the markets are, on average, right • Sufficient information to predict cash flows is lacking • Firms are cyclical. For P/E ratios, use normalized earnings (i. e. , earnings averaged throughout the business cycle) • Growth rate differences among firms are large. Comparable Transactions • Recent transactions of similar firms exist • An analyst has a short term time horizon • An analyst has confidence the markets are, on average, right • Sufficient information to predict cash flows is lacking Same or Comparable Industry • and risk • An analyst has confidence the markets are, on average, right • Sufficient information to predict cash flows is lacking

When to Use Various Valuation Methodologies Reference: ‘Merger Acquisitions and Other Restructuring Activities’ by Donald De Pamphilis 6 th Edition 2012 Replacement Cost • An analyst wants to know the current cost of replicating a firm’s assets • The firm’s assets are easily identifiable, tangible, and separable • The firm’s earnings or cash flows are negative Tangible Book Value • The firms’ assets are highly liquid • The firm is a financial services or product distribution business • The firm’s earnings and cash flows are negative Breakup Value

Merger Valuation Ranbaxy Laboratories merging with Sun Pharmaceutical (Report dated 6 April 2014 by S R Batliboi & Co. LLP) Ranbaxy and Sun were valued using Market Price and Discounted Cash Flows with equal weight to both methods. Transaction being in the nature of acquisition, typically acquisitions involve payment of control premium by the acquiror to the sellers of the target for getting control of the target. The control premium paid on transactions involving change of control range from 11% to 31%. Considering this, if one adds an average of the aforesaid range of control premium to the relative value of Ranbaxy considered in the fair exchange ratio mentioned above, the fair exchange ratio including the control premium would be 8 (eight) equity shares of SPIL of Rs. 1/ each fully paid up for every 10 (ten) equity shares of RLL of Rs. 5/ each fully paid up. Grindwell Norton Limited Report dated 19 April 2013 by S R Batliboi & Co. LLP Grindwell Norton Limited (“GNO”), SEPR Refractories Limited (“SEPR”), Saint Gobain Sekurit India Limited (“SGSIL”) and Saint Gobain Crystals and Detectors Limited (“SGCDL”) Exchange ratio for the proposed merger of SEPR, SGSIL and SGCDL into GNO. Equity shares of GNO and SGSIL are listed and traded, hence, valued using the Market Price method. Used the Comparable Companies Multiple method for valuing SEPR and SGCDL as there are comparable companies whose equity shares are listed and traded. DCF method was used for valuing the Companies as it captures the future earning potential of all the Companies. The valuation of equity shares of GNO and SGSIL has been arrived at on the basis of Market approach, Income approach (DCF) and Asset approach (NAV). A weightage of 40% has been given to Market approach, 50% to Income approach and 10% to Asset approach.

Coverage under a (Composite) Scheme of Restructuring 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Definitions Share capital Interdependence, Non severability, Sequencing Transfer of undertaking – movable & immovable Consideration/ Exchange Ratio/ Valuation Treatment of specified properties/rights, Trademarks Treatment of specified shares Transfer of guarantees Contracts, deeds, bonds and other instruments Legal proceedings, Securities, Charges, Mortgage, Validity of existing resolutions, adjustments, etc. Transferor company’s staff, workmen and employees, PF/Gratuity/Superannuation Funds Operative date of scheme – Appointed date, Effective date Conduct of business Taxes & Duties, Accounting Treatment AS 14 Issue of shares; Declare Record date, Increase in Authorised Share Capital Dividends, profits, bonus/rights shares, Reduction of capital, issue of preference shares, Change in Objects Clause, Change on Name Modification/amendments to Scheme, Expenses connected with Scheme Resultant Balance Sheet, Demerged Balance Sheet, Immovable/Leasehold properties, Trade marks/Licenses/IPRs (Audited/Provisional), Schedule of Properties Scheme conditional on a approvals/sanctions

Appointed Date & Effective Date 1/2 “Appointed Date” is stated as a date appointed by the parties to the amalgamation concerned. “Effective Date” is defined as the date on which the order of the court sanctioning the scheme is filed with the Ro. C concerned. “The scheme shall be effective from the Appointed Date but shall be operative from the Effective Date”. � With effect from the appointed date, the undertaking, assets and liabilities of the transferor company shall stand transferred to and vest in the transferee company; � On and from the appointed date up to the effective date, the profits/losses of the transferor company shall belong to the transferee company; � On and from the appointed date up to the effective date, the operations/activities carried out/to be carried out by the transferor company shall be carried out/regarded to have been carried out by the transferor company in trust for and on behalf of the transferee company; � The share exchange ratio of both the companies is worked out on the basis of the assets and liabilities position on the appointed date.

Appointed Date & Effective Date 2/2 • • Commercial objectives of the parties i. e. if the parties choose a cut off date from which the assets/liabilities and profits/losses need to be transferred. Ease of identifying assets/liabilities or segregation of profits/losses. Ease from an accounting perspective. Tax considerations – carry forward of loss. Stamp Duty considerations Reasonable time period between the Appointed Date and the Effective Date. Appointed date could either be retrospective date (i. e. , a date prior to the effective date) or prospective date (i, a date subsequent to the effective date). Also, the Appointed Date and the Effective Date may coincide too. Scheme of Amalgamation and Arrangement amongst Sterlite Energy Limited ('SEL'), Sterlite Industries (India) Limited ('Sterlite'), Vedanta Aluminium Limited ('VAL'), Ekaterina Limited ('Ekaterina'), Madras Aluminium Company Limited ('Malco') and SESA STERLITE LIMITED (Formerly Sesa Goa Limited) Appointed date Effective date SEL January 1, 2011 August 19, 2013 Sterlite April 1 2011 August 17 2013 Ekaterina April 1, 2012 August 17 2013 Malco (residual) August 17, 2013 August 17 2013 VAL (Aluminium business demerger) April 1, 2011 August 19, 2013 Slump sale of VAL power division August 19, 2013 Acquisition of 38. 68% in Cairn India August 26, 2013

M&A Deal Documents Term Sheet/ Lo. I/ Mo. U � � � � � Initial understanding Predefined time frame Non binding in nature except for confidentiality Typically includes: Transaction rationale tentative deal structure valuation equity stake pegged to a formula voting rights right of first refusal, drag along rights, tag along rights etc. Exclusivity Closing conditions Deal documents Share Subscription/ Purchase Agreement Representations/warranties/Indemnities Shareholders agreement Business Purchase agreement Asset Purchase agreement (for asset sale instead of business ale) Transfer documents (licences, trademarks, copyrights, technology)

Key Deal Covenants/Terms � Subject matter of transaction Sale of shares, sale of assets, trademarks etc. � Consideration � Payment mechanism � Debt free/ cash free (before business is sold) � Right of first refusal � Tag along Rights (co sale rights with selling shareholder) � Drag Along Rights (force another shareholder to join in sale of company) � Non Compete � Closing date � Signing date � Conditions precedent � Conditions subsequent � Representations � Indemnities � Warranties � Escrow � Dead lock � Completion accounts

M&A: Traps and Structuring Opportunities India S. NO. 1 2 3 4 5 6 7 8 9 1 2 3 4 5 6 7 Top Nine Traps Quality of financial information Several sets of books Non compliance with labour laws & accounting consequences Hidden liabilities Guarantees and other commitments granted to third parties Lack of satisfactory ownership documentation or multiple ownership titles Not fulfilling registration requirements with relevant authorities Profits repatriation and exchange control restrictions Import/Export restrictions Top Tax Traps Thin capitalization rules Transfer pricing documentation Controlled Foreign Companies rules Dissuasive tax rates (Corporate income tax/capital gains) Tax treaties Stamp duties on structuring operations Use of tax losses in case of change of control of the tax payer India Moderate Issue Non significant Significant Issue Moderate Issue Non significant Moderate Issue Less significant trap Non significant trap Not applicable Non significant trap Significant trap

M&A: Traps and Structuring Opportunities S. NO. 1 2 3 4 5 6 7 8 9 Next Nine Issues Significant differences between local and international accounting standards Significant post acquisition salary increases Choosing an inappropriate legal form Unclear power sharing agreement Prohibited sectors Earnouts not allowed Minimum amount for FDI Control ceilings Personal liability of legal representative 1 2 3 4 5 6 7 8 Top Tax Incentives Amortization of assets/Goodwill Corporate income tax/capital gains rates Carry back/carry forward of tax losses Tax treaties (tax sparing credits) Deduction of financial costs Group tax regime Tax exemption applied to mergers/demergers Local incentives supporting investments India Moderate Issue Significant Issue Moderate Issue Significant Issue Non significant Moderate Issue Non significant Significant opportunity Low opportunity Non significant opportunity Significant opportunity Not applicable Significant opportunity Non significant opportunity

Consideration for Overseas deal structure Due diligence: Local lawyers/ consultants in overseas jurisdiction Governing law and enforcement Law of contract Restrictions on foreign exchange inflows/ outflows and investments Tax regime and compliance Structuring for tax efficiency Compliance with laws of multiple regulators and jurisdictions Dispute mechanics resolution Fund flow mechanics: Currency fluctuation and moving across frontiers Language and culture Enforcement mechanisms Time for redressal Effectiveness of judicial system Neutrality Appeal process Formality of order and implementation

SPV considerations Ø Corporate tax rate Ø Taxation of dividend/interest Ø Withholding tax on dividend/ interest/ Royalty/ Fees for Technical Services Ø Capital gain tax on transfer of investments / shareholding Ø Thin Cap rules Ø East of access to debt and equity capital Ø Black listed Countries Ø Treaty network Ø Cost of setting up and administration Ø Other non tax considerations like political stability, banking facility etc. Ø Cross Border Merger Ø Limitation on Benefit Clause (Lo. B) Ø Business connection/ Permanent Establishment Exposure Mauritius Netherlands Singapore Cyprus? ! Luxembourg Tax Havens BVI/ Cayman Islands UAE

FEMA & Valuation FDI Issue of shares Transfer of shares from Resident to Non Resident Listed Company Unlisted Company Market Price as per SEBI Preferential Allotment Internationally accepted pricing Methodology for valuation of shares on arm’s length basis Price of shares shall not be less than the fair value worked out as per any internationally accepted pricing methodology for valuation of shares on arm’s length basis Transfer of shares from Non Resident to Resident Price of shares shall not be more than the fair value worked out as per any internationally accepted pricing methodology for valuation of shares on arm’s length basis Convertible instruments: Based on conversion formula which has to be determined / fixed upfront. Price at the time of conversion should not be less than the fair value worked out, at the time of issuance of these instruments. Only Certification by SEBI registered Merchant Banker/ Chartered Accountant Valuation & Certification by SEBI registered Merchant Banker/ Chartered Accountant Non residents (including NRIs): Subscription to its Memorandum of Association: Made at face value subject to their eligibility to invest under the FDI scheme NRIs on non repatriation basis under Schedule 4 of FEMA 20: No express provision for valuation Pricing not applicable for transfers between two Non Residents SEZs against import of capital goods into equity shares: Committee of Development Commissioner Preferential Allotment Pricing Guideline under SEBI (ICDR) Regulations 2009: “Price not less than the higher of Avg. weekly high and low closing price over a trailing six month period, or a trailing two week period, from the "relevant date of transaction. ” “Relevant Date” means date thirty days prior to the date of GM of shareholders

FEMA & Valuation ODI (Investment in JV/WOS abroad) Issue of shares/ Transfer of Shares Investment of Funds exceeding USD 5 Mio. Swap of Shares Valuation by SEBI Registered Merchant Banker or an Investment Banker/Merchant Banker registered outside India registered. In any other case Chartered Accountant/ Certified Public Accountant Specific valuation method has not been prescribed

FEMA Inbound Investment (Non Resident investing into India) FDI (Equity, CCPS & CCDS) Approval Route Outbound Investment (Resident investing outside India) ODI (JV/WOS abroad) ECB (Others) Automatic Route Approval Route 67

Foreign Investment in India Schematic Representation Foreign Inbound Investments Foreign Direct Investments Company Sch. 1, 10 Automatic Route Foreign Portfolio Investments Foreign Venture Capital Investments Other Investments (G Sec, NCDs, etc. ) Investments on Non Repatriable basis LLP Sch. 9 Govt. Route Persons Resident Outside India NRIs/ PIOs Sch. 3 FIIs/ QFIs/ RFPIs Sch. 2, 2 A, 8 SEBI Regd. FVCIs/AIFs Sch. 6 VCF, IVCUs FIIs/RFPIs, NRIs, PIO, QFIs Long Term Investors Sch. 5 NRIs, PIOs Sch. 4

Foreign Direct Investment into an Indian company Kinds of Investment • Automatic Route – no prior approval from the RBI/ Government • Approval Route – prior approval of the FIPB required (no separate RBI approval) Mode of Investment • Greenfield: Setting up a new JV/ WOS (fresh issue of shares) • Brownfield: Relating to existing investments/ business activities: Brownfield Investment Share Purchase Conversion of ECB/ preincorp payables/ import payables, royalty, other legitimate dues etc. Gift of shares Share swap Rights/ Bonus issue/ ESOP/ Sweat Equity Merger/Demerger/ Amalgamation/ Reconstruction

Prohibited Sectors …. 1/2 Under Schedule 1 of FEMA 20 (FDI) FDI is prohibited in: (a) Lottery Business, including Government/private lottery, online lotteries, etc. (b) Gambling and Betting, including casinos etc. (c) Chit funds (d) Nidhi company (e) Trading in Transferable Development Rights (TDRs) (f) Real Estate Business or Construction of Farm Houses (g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes (h) Activities/sectors not open to private sector investment e. g. (I) Atomic Energy and (II) Railway operations (other than permitted activities mentioned in entry 18 of Annex B of FDI Policy). Explanation to Regulation 5(7 A) of FEMA 20 No class of investors under Schedule 1 (FDI), 2 (FII), 2 A (FPI), 3 (NRI), 4 (NRI on non repatriation), 6 (FVCI) and 8 (QFI) of FEMA 20 shall make investment, directly or indirectly, in any security issued by any company engaged or proposes to engage in prohibited sector under FEMA 1.

Prohibited Sectors …. 2/2 Under FEMA 1 Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as, Trusts) which is engaged or proposes to engage in the following activities 6: (a) Business of chit fund, or (b) Nidhi company, or (c) Agricultural or plantation activities, or (d) Real estate business, or construction of farm houses, or (e) Trading in Transferable Development Rights (TDRs). � “Real estate business” will have the same meaning as provided in FEMA Notification No. 1/2000 RB dated May 03, 2000 read with RBI Master Circular i. e. dealing in land immovable property with a view to earning profit or earning income there from and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.

Overseas Direct Investment An Indian company/Partnership Firm/ LLP/ Body Corporate that wishes to acquire or invest in a foreign company outside India must comply with the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 (the “ODI Regulations”). ‘General permission’ to make a ‘direct investment outside India’ in bona fide business activities. The term ‘direct investment outside India’ has been defined as ‘investment by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity or by way of purchase of existing shares of a foreign entity either by market purchase or private placement, or through stock exchange, but does not include portfolio investment’, but includes loans, guarantee. Direct Investment in a Joint Venture/Wholly Owned Subsidiary Investment in company listed overseas. Investment by mutual funds. Swap or Exchange of Shares. Investment by way of capitalization of exports, or fees royalties etc. , due to the Indian company. Transfer of shares. Investment by Individuals Limits on individuals owning shares in foreign companies. An individual may inter-alia invest in equity and in rated bonds / fixed income securities of overseas companies as permitted in terms of the limits and conditions specified under the Liberalized Remittance Scheme (up to a maximum amount of US$ 125, 000); and also under ODI Scheme.

Direct Investment outside India – Automatic route Extent of Investment: �The total financial commitment in JV / WOS < 400% of the net worth of the Indian Party as on the date of the last audited balance sheet + Balance in EEFC Account + ADR/GDR Proceeds Meaning of Net worth & Financial commitment : Net worth: Paid up capital (equity + Preference Free Reserves shares) commitment: �Financial Contribution to equity/FCPref. Shares of the JV / WOS Loan to the JV/ WOS 100% of guarantee + 50% of performance guarantee to or on behalf of JV / WOS Bank guarantee by Indian resident bank + Charge on India assets

e Overseas Direct Investments by Indian Party – Rationalization / Liberalization. . . 1/3 (i) Creation of charge on shares of JV / WOS / step down subsidiary (SDS) in favour of domestic / overseas lender In terms of the extant FEMA provisions, creation of charge (pledge) on the shares of an JV / WOS of an Indian party in favour of domestic / overseas lender for the purpose of availing facilities (funded or non funded) by the Indian party and / or the concerned JV / WOS is under the automatic route. It has been decided that the designated AD bank may permit creation of charge / pledge on the shares of the JV / WOS / SDS (irrespective of the level) of an Indian party in favour of a domestic or overseas lender for securing the funded and / or non funded facility to be availed of by the Indian party or by its group companies / sister concerns / associate concerns or by any of its JV / WOS / SDS (irrespective of the level) under the automatic route subject to the following: a) for undertaking financial commitment; b) Compliance to the provisions under Regulation 18 of the Notification ibid; c) which charge has been created; d) The loan / facility availed by the JV / WOS / SDS from the domestic / overseas lender shall be utilized only for its core business activities overseas and not for investing back in India in any manner whatsoever; e) A certificate from the Statutory Auditors’ of the Indian party, to the effect that the loan / facility availed by the JV / WOS / SDS has not been utilized for direct or indirect investments in India, is to be obtained and kept by the designated AD; f) subsidiary shall be governed by the extant FEMA provisions / regulations issued by the Reserve Bank from time to time; g) concern or to any of its overseas JV / WOS / SDS shall also be governed by the prudential norms and other guidelines issued by the Department of Banking Regulation (DBR, the erstwhile DBOD), Reserve Bank of India from time to time; and h) applicable, is under the examination of the Reserve Bank and the decision taken in this regard shall be conveyed in due course for necessary compliance at AD / Indian party level.

Overseas Direct Investments by Indian Party – Rationalization / Liberalization. . . 2/3 (ii) Creation of charge on the domestic assets in favour of overseas lenders to the JV / WOS / step down subsidiary As per the extant FEMA provisions, creation of charge on the domestic assets (movable / immovable / financial / other) of an Indian party (or its group / sister / associate concern including the individual promoter / director) in favour of an overseas lender to the JV / WOS / step down subsidiary (SDS) requires prior approval of the Reserve Bank. It has been decided that the designated AD bank may permit creation of charge (by way of pledge, hypothecation, mortgage, or otherwise) on the domestic assets of an Indian party (or its group companies / sister concerns / associate concerns including the individual promoters / directors) in favour of an overseas lender for securing the funded and / or non funded facility to be availed of by the JV / WOS / SDS (irrespective of the level) of the Indian party under the automatic route subject to the following: (a) undertaking the financial commitment; (b) Compliance to the provisions under Regulation 18 A(1) of the Notification ibid; (c) The domestic assets, on which charge is being created, are not securitized; (d) been created;

Overseas Direct Investments by Indian Party – Rationalization / Liberalization. . . 3/3 (iii) Creation of charge on overseas assets in favour of domestic lender Creation of charge on the overseas assets of JV / WOS / SDS of an Indian party in favour of a domestic lender to the Indian party or to its group / sister / associate concern or to any of its overseas JV / WOS / SDS requires prior approval of the Reserve Bank. It has been decided that the designated AD bank may permit creation of charge (by way of hypothecation, mortgage, or otherwise) on the overseas assets (excluding the shares) of the JV / WOS / SDS (irrespective of the level) of an Indian party in favour of a domestic lender for securing the funded and / or non funded facility to be availed of by the Indian party or by its group companies / sister concerns / associate concerns or by any of its overseas JV / WOS / SDS (irrespective of the level) under the automatic route subject to the following: a) for undertaking financial commitment; b) Compliance to the provisions under Regulation 18 A(2) of the Notification ibid; c) The overseas assets, on which charge is being created, are not securitized; d) which charge has been created; e) The loan / facility availed by the JV / WOS / SDS from the domestic lender shall be utilized only for its core business activities overseas and not for investing back in India in any manner whatsoever; f) SDS has not been utilized for direct or indirect investments in India, is to be obtained and kept by the designated AD; g) the Reserve Bank; and h) applicable, is under the examination of the Reserve Bank and the decision taken in this regard shall be conveyed in due course for necessary compliance at AD / Indian party level. Circular No. 54 dated December 29, 2014

Routing of funds raised abroad to India It has come to our notice that some Indian companies are accessing overseas market for debt funds through overseas holding / associate / subsidiary / group companies. It has also been reported that such borrowings are raised at rates exceeding the ceiling applicable in terms of extant FEMA regulations and that the funds so raised are routed to the Indian companies which accounts for sole/major operations of the group. Different modalities/structures are resorted to for channeling such funds for Indian operations including investment in rupee bonds floated by the Indian company. On a review of the matter in light of the existing regulatory framework, it is clarified as under:

ch on. The Security for External Commercial Borrowings. . . 1/2 2. Under the extant ECB guidelines, the choice of security to be provided to the overseas lender / supplier for securing ECB is left to the borrower. With a view to liberalising, expanding the options of securities and consolidating various provisions related to creation of charge over securities for ECB at one place, it has been decided that AD Category I banks may allow creation of charge on immovable assets, financial securities and issue of corporate and / or personal guarantees in favour of overseas lender / security trustee, to secure the ECB to be raised / raised by the borrower, subject to satisfying themselves that: (i) (ii) the underlying ECB is in compliance with the extant ECB guidelines, lender / security trustee, on immovable assets / financial securities / issuance of corporate and / or personal guarantee, and (iii) No objection certificate, wherever necessary, from the existing lenders in India has been obtained. 3. Once aforesaid stipulations are met, the AD Category I bank may permit creation of charge on immovable assets, financial securities and issue of corporate and / or personal guarantees, during the currency of the ECB with security co terminating with underlying ECB, subject to the following: (a) Creation of Charge on immovable assets: i. Immovable Property in India) Regulations, 2000. ii. lender / security trustee. iii. person resident in India and the sale proceeds shall be repatriated to liquidate the outstanding ECB. (b) Creation of Charge on Movable Assets In the event of enforcement / invocation of the charge, the claim of the lender, whether the lender takes over the movable asset or otherwise, will be restricted to the outstanding claim against the ECB. Encumbered movable assets may also be taken out of the country.

Security for External Commercial Borrowings. . . 2/2 (c) Creation of Charge over Financial Securities

‘Non Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2015’. Requirement to obtain prior approval of Reserve Bank of India for acquisition or transfer of control of NBFCs. The prior written permission of the Reserve Bank of India shall be required for – (i) shares or otherwise; (ii) merger/amalgamation of an entity with an NBFC that would give the acquirer / another entity control of the NBFC; (iii) merger/amalgamation of an entity with an NBFC which would result in acquisition/transfer of shareholding in excess of 10 percent of the paid up capital of the NBFC. (iv) approaching the Court or Tribunal under Section 391 394 of the Companies Act, 1956 or Section 230 233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or NBFCs.

Accounting for Amalgamation • Accounting Standard – 14 [AS – 14] issued by the ICAI deals with the Accounting for Amalgamation: - Types of Amalgamation Methods of Accounting for Amalgamations Treatment of Reserves/ Goodwill on Amalgamation Disclosures • Applicability of AS – 14: - Effective date: April 1, 1995 Applicable to companies; however, principles can be applied for enterprises as well • Definition: Amalgamation means an amalgamation pursuant to the provisions of the Companies Act, 1956 or any other statute which may be applicable to companies • Amalgamation needs to be accounted, with effect from the Appointed Date - Appointed Date can either be prospective or retrospective 81

Accounting – Types of Amalgamation in the Nature of Merger Five Cumulative Conditions • All the assets and liabilities of transferor companies are transferred • Holders of at least 90% of face value of equity shares of transferor co. (other than shares held by transferee co. ) become equity shareholders of the transferee co. • Consideration to be discharged by issue of equity shares (cash only for fractional shares) • Business of transferor company is intended to be carried on by transferee co. • No adjustments are intended to be made to the book value of assets and liabilities of transferor company Amalgamation in the Nature of Purchase Amalgamation not complying with any of the five conditions above 82

Accounting – Pooling of Interest Method Amalgamation in the Nature of Merger • All assets, liabilities and reserves of transferor companies are recorded at their existing book values by the transferee company • Line by line merger • Identity of reserves are maintained • No change can be made in carrying amounts • Uniform accounting policies should be applied – changes in carrying amounts permitted only to ensure application of uniform accounting policies • Difference between consideration and share capital of transferor company to be adjusted in reserves of transferee company • • Consideration in case of merger of existing subsidiary Nature of reserves of the transferee company against which such difference is to be adjusted not stipulated – scheme can provide for the same • Whether adjustment against balance in Securities Premium permitted 83

Accounting – Purchase Method Amalgamation in the Nature of Purchase • Objective: Account for amalgamation by applying the same principles are applied in the normal purchase of assets • Two options for accounting under purchase method: • • Book Value Accounting – Assets and liabilities are recorded at their existing book values • Fair Value Accounting – Assets and liabilities are recorded at their respective fair values Fair Value Accounting • Net assets recorded can exceed consideration discharged • Recording of select class of assets at fair value • Possibility of fair valuing assets of Transferee Co. ? • The identifiable assets and liabilities may include assets and liabilities not recorded in the books of the transferor company • Identity of the reserves other than statutory reserves is not maintained • Difference between Net Assets and Consideration paid: • If Positive – Capital Reserve • If Negative – Goodwill 84

Accounting – Purchase Method Amalgamation in the Nature of Purchase • Credit to General Reserve instead of Capital Reserve • Impact of allotment of shares at a pre determined premium • Goodwill on amalgamation should be amortized over its useful life, not exceeding 5 years unless longer period is justified AS-14 is applicable to Amalgamation and not to demerger Clarified by Delhi court, while approving scheme of arrangement between Sony India Pvt. Ltd. and Sony India Software Centre Pvt. Ltd. 85

Accounting for Demerger • No specific accounting standard prescribed for demerger accounting • Principles laid down under AS 14 can be relied upon to some extent • Accounting treatment in books of Demerged Co: − Net worth of business demerged to be debited to reserves − Hierarchy of reserves to be debited can be specified in the Scheme − Adjustment against Securities Premium – Compliance with Section 78 read with Section 100 of the Companies Act − Typically, portion of share capital is not demerged − If portion of share capital is to be demerged – Amounts to capital reduction • Accounting treatment in books of Resulting Co: − Difference between net worth of business acquired and consideration discharged to be recorded as reserves − Typically, ROC insists such credit to be into Capital Reserve − Scheme can provide for credit into General Reserve 86

MCA notifies Ind AS 103 1. From FY 15 16: Any company can voluntary adopt Indian Accounting Standards from Financial year 15 16 with comparatives to be given for the period ending on 31 March 2015 or thereafter. 2. From FY 16 17 : Following companies to mandatorily adopt Ind AS from FY 16 17 onwards with comparatives for period ending 31 March 2016 or thereafter: � Companies with net worth of Rs 500 crores or more and whose equity or debt securities are either listed or in the process of listing in any Indian stock exchange. � Companies other than above and whose net worth is Rs 500 crores or more. � Holding, subsidiary, joint venture and associate of above companies. 3. From FY 17 18 : Following companies to mandatorily adopt Ind AS from FY 17 18 onwards with comparatives for period ending 31 March 2017 or thereafter: � Companies with net worth less than Rs 500 crores and whose equity or debt securities are either listed or in the process of listing in any Indian stock exchange. � Companies other than above and whose net worth is Rs 250 crores or more but less than Rs 500 crores. � Holding, subsidiary, joint venture and associate of above companies. � Provided that nothing stated above, except companies adopting Ind AS voluntarily, shall apply to companies whose securities are listed or are in the process of being listed on SME exchange as referred to in Chapter XB or on the Institutional Trading Platform without initial public offering in accordance with the provisions of Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Indian Accounting Standard (Ind AS) 103 This Ind AS applies to a transaction or other event that meets the definition of a business combination. Business Combination: A transaction or other event in which an acquirer obtains control of one or more businesses. Transactions sometimes referred to as ‘true mergers’ or ‘mergers of equals’ are also business combinations as that term is used in this Ind AS. The acquisition method: An entity shall account for each business combination by applying the acquisition method. Applying the acquisition method requires: (a) identifying the acquirer; (b) determining the acquisition date;

Rates of stamp duty (Merger and Demerger) State Maharashtra Gujarat Delhi Karnataka Andhra Pradesh Madhya Pradesh Stamp duty on amalgamation Subject to a maximum of Rs. 25 crore; 10 percent of the aggregate of the market value of the shares issued or allotted in exchange or otherwise and the amount of consideration paid for such amalgamation: Provided that the amount of duty, chargeable under the clause shall not exceed (i) 5 percent of the true market value of the immovable property located within the State of Maharashtra of the transferor company; or (ii) 0. 7 percent of the aggregate of the market value of the shares issued or allotted in exchange or otherwise and the amount of consideration paid for such amalgamation Whichever is higher Subject to maximum of Rs. 25 crore (i) an amount equal to 1 percent of the aggregate of the market value of shares issued or allotted in exchange of or otherwise, or the face value of such shares, whichever is higher and the amount of considerations, if any, paid for such reconstruction/amalgamation, or (ii) an amount equal to 1 percent of the true market value of the immovable property situated in the State of Gujarat of the transferor company, whichever is higher 3% of Movable and Immovable properties (wherever located in whole of India) Amalgamation of companies, including a subsidiary amalgamating with parent company: 2 percent on the market value of the property of the transferred to the transferee company; or An amount equal to 1 percent of the aggregate value of shares issued or allotted in exchange, or otherwise and in case of a subsidiary company, shares merged (or cancelled) with parent company and in addition, the amount of consideration if any, paid for such amalgamation; whichever is higher 2 percent of the market value of the property. It has been provided that ‘market value of property’ means total value of shares issued or allotted or consideration 7 percent of the market value if the immovable property transferred which is located within the State of Madhya Pradesh; or 0. 7 percent of the aggregate market value of the shares issued or allotted in exchange or otherwise and the amount if consideration paid for such transfer; Whichever is higher

Rates of stamp duty State Rajasthan Stamp duty on amalgamation 4 percent of the market value of the property. It has been provided that ‘market value of property’ shall be deemed o be the amount of total value of shares issued by transferee company and consideration paid on amalgamation Tamil Nadu 2 percent of the market value of the immovable property of the transferor company, located within the State of Tamil Nadu, which is the subject matter of the conveyance; or 0. 6 percent of the aggregate of the market value of the shares or other marketable securities which is the subject matter of the conveyance, issued or allotted in exchange or otherwise, and the amount of consideration paid for such amalgamation West Bengal 6 percent of the aggregate of the market value of the shares issued or allotted, in exchange or otherwise, and the amount of the consideration paid by the transferee company, for such amalgamation or merger: Provided that the amount of such duty chargeable under this article shall not exceed an amount equal to 2 percent of the market of the immovable property located within the state of the West Bengal of the transferor company; or an amount equal to half percent of the aggregate of the market value of the shares issued or allotted, in exchange or otherwise, and the amount of consideration paid by such transferor company, for such amalgamation or merger whichever is higher

Stamp Duty Planning • Transactions between holding company and subsidiary company (1937 notification): May be in force only in few states • Stamp duty on conveyance or transfer of movable or immovable property • Stamp duty on transfer of shares 0. 25% • Stamp duty on Shareholder Agreement/ JV agreement • Stamp duty on Share Purchase Agreements • Shifting of Registered Office • “Transfer of Movable Assets by Delivery” wording in the Scheme • Slump Sale post Appointed Date but before Effective Date or Court Order Date • Slump Sale or Asset Sale through a Scheme, terming the transaction as hive off/ demerger • Reduction in current assets through payment of current liabilities • Subsidiarisation prior to merger, ensuring that there would be no allotment of shares – Only few states levy stamp duty on cancellation of shares

TIME FRAME for Effecting a Scheme (Indicative) 1/2 Sl. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Action Convene Board meeting to consider and approve in principle, amalgamation and appoint an expert for valuation of shares to determine the share exchange ratio, preparation of Composite Scheme (merger/amalgamation/arrangement/restructuring) Hold Board Meeting Convene a Board Meeting to approve the Scheme Hold board Meeting Intimate to the Stock Exchange(s) (where the shares of the company are listed, if they are) + SEBI Compliances Apply to Financial Institutions, Debenture Trustees and Banks for their approval + SEBI Take approval to the Scheme from stock Exchangeswhere shares are listed Apply to the High Court concerned seeking directions for holding share holders' meetings & creditors' meetings Obtain summons for directions and minutes of the order from the High Court for holding the meetings Dispatch notice of the meetings Advertise in newspapers regarding the proposed Scheme Make an affidavit of service of individual notices to shareholders and creditors as well as publication of notice in newspapers, to be filed with the High Court Hold the meetings of shareholders and creditors Apply for approval from RBI for issue and allotment of shares to non residents Indicative Time – Days x X+14 X+44 X+58 X+59 X+64 X+95 X+102 X+ 124 X+126 X+130 X+149 X+151

Sl. No 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Action File reports of the Chairman of the shareholders' and creditors' meetings with the High Court File Petition and Affidavit with the High Court Obtain an order of admission of the Petition in the High Court File Form No. 23 with the Registrar of Companies Obtain RBI approval for issue and allotment of shares to non residents Send individual notices to creditors (in case High Court has not allowed exemp tion from holding of creditors' meeting) Arrange for notices to be published in the newspapers (one in English and one in the local language) inviting objections to the proposed scheme of amalgamation Arrange for seven days before the hearing, an affidavit as to the service of individual notices to creditors and publication of notices in newspapers to be filed with the High Court Attend hearing of Petition and passing of Order in the High Court Obtain Order from the High Court, Declare Record date File a copy of the Order of the High Court sanctioning the Scheme with the concerned Registrar of Companies, Allotment of shares, Payment of stamp duty, & Other compliances Indicative Time – Days X+157 X+164 X+174 X+181 X+191 X+203 X+210 X+216 X+250 X+254

Disclaimer These PPTs are intended to serve as a guide to the Member Participants of the MBF Course and for information purposes only; and the contents are not to be construed in any manner whatsoever as a substitute for professional advice or legal opinion. No one should act on such information without appropriate professional advice after a thorough examination of particular situation. Information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. While due care has been taken to ensure that the information is current and accurate to the best of our knowledge and belief, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. These PPTs contain information that is privileged and confidential. Unauthorized reading, dissemination, distribution or copying of this document is prohibited. We shall not be responsible for any loss or damage resulting from any action or decision taken on the basis of contents of this material.

Thank You Vijay Gupta VKGN & Associates Chartered Accountants 311, Ansal Bhawan 16, Kasturba Gandhi Marg New Delhi – 110001 Mobile: 9810083373 vijay. gupta@vkgnassociates. com