PART - III - Udyog Bandhu

- Preparation and circulation of information memorandum to prequalifiedbuyers- Due diligence and preparation of transaction documents- Valuation of Assets/shares- Receiving of bids- Evaluation of bids- Signing of Sale AgreementAdvantages- Maximises price because of transfer of management rights- Brings technical / marketing / financial / managerial expertise ofthe buyer to the company- Increased value of residual Govt. shareholding- Low cost and less regulationDisadvantages2.2 Capital Market- Time consuming- Issues relating to management, land and labour etc. to beresolved(a)Offer For Sale To Public At Fixed PricePricing: Decided before the transaction; at a discount to market to ensure successand immediate capital appreciation for investorsTarget investor set: Mix of retail and wholesale, with some reservation for smallinvestorsTransaction costs: High, in the range of 2-5% depending on issue sizeTime involved: 3 - 4 monthsRegulation: SEBI guidelines, Stock Exchange requirementsSuitability- Companies for which small investor interest is expected to be substantial- Profit making companies with good future prospects- Companies not in need of significant technical, managerial and marketinginputsPrecedents: Offer of 1 million shares of VSNL @ Rs.750 per share.Methodology: Offer for sale- An issue of Equity Shares held by the Government to the public at large at apre-determined price- Through an Offer Document- Equity Shares can be accompanied by sweeteners such as warrants76