PART - III - Udyog Bandhu

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- Enhances visibilityDisadvantages- Time consuming process- Stringent regulatory requirements- Accounting norms and disclosures and regular reporting to SEC in case ofADRs- High cost about 4-5% for ADRs and about 3% for GDRs(e)Private Placement of EquityPricing: valuation by merchant banker and feedback from institutional investorsor price discovered through book buildingTarget investor set: Essentially institutional including multilateral agencies,private equity fundsTransaction costs: lowTime involved: 1-2 monthsRegulation: Foreign investment guidelines in case of overseas investors, SEBIguidelines in case of domestic listed companiesSuitability- Unlisted companies- Listed companies with low floating stock and low volumes- Companies with good intrinsic value and good future prospectsPrecedents: CONCOR, GAIL (Domestic issue with FIIs participation)Methodology: placement of equity- To a set of institutional investors- At a negotiated price arrived at through valuation or price discovery throughbook building- With issues of management rights and exit option resolved- Through an information memorandum circulated among institutionalinvestors and due-diligence- In case of listed companies as placement of less than 15% equity to investorsdoes not trigger Take-over code (as per SEBI guidelines)Advantages- Less time consuming- No regulatory compliance requirements, except in case of foreign investment- Low transaction costDisadvantages- Does not ensure widespread shareholding- May not be considered transparent80
(f)AuctionPricing: optimised through bidding. In case of Dutch Auction, allotments made atsingle price. In case of French Auction, allotments made at bid priceTarget investor set: Essentially institutionalTransaction costs: LowTime involved: 1-2 monthsRegulation: SEBI Take-over codeSuitabilityCompanies with good intrinsic valueUnlisted companiesListed companies with low floating stockPrecedents: Initial rounds of disinvestment in CPSUs.Methodology: Auction through the Dutch / French Auction- To a set of institutional investors- At a price discovered through the bidding process- For a pre-determined number of Equity Shares- Allocations made• At a cut-off price to all investors above the cut-off price in case of DutchAuction• At the bid price in case of French Auction- Marketing through Analysts' meet and one-on-one discussions- In case of listed companies, placement of less than 15% equity to each investorto avoid trigger of Take-over code (or as per SEBI guidelines)Advantages- Optimises receipts to the GoI (amount higher in case of French Auction)- Transparent mechanism- Less time consuming with no regulatory compliance requirements- Low transaction costDisadvantages- Does not ensure broad based shareholding2.3 WarehousingPricing: Market determined price, after building in returns to the warehouse. Profiton sale, net of selling expenses by warehouser shared in pre-determined ratioTarget investor set: Essentially institutionalTransaction costs: Fixed return to warehouser less cost of funds for GoITime involved: within 1 month81
Page 2: Executive Summary1. The procedure t
Page 6 and 7: Disinvestment - Process Flow ChartD
Page 9 and 10: 2. The Core Group Committee of Secr
Page 11 and 12: Legal advisors examine the followin
Page 13 and 14: CHAPTER - IIVARIOUS METHODOLOGIES F
Page 16 and 17: - Ensures broad based shareholding-
Page 20 and 21: Regulation: RBI restrictions on ban
Page 22 and 23: - Low cost of transaction- Relative
Page 24 and 25: CHAPTER - IIISTRATEGIC SALEThe vari
Page 26 and 27: 3. Management Organizationi) An ove
Page 28 and 29: i) Draft Share Purchase Agreement;i
Page 30 and 31: pertaining to employer - employee r
Page 32 and 33: 4. Management of the company: It de
Page 34 and 35: o List of all employees indicating
Page 36 and 37: 3.2.8 Submission of final bidDetail
Page 39 and 40: know what bid the others have submi
Page 41 and 42: Similarly if the closing date debt
Page 43 and 44: CHAPTER -IVVALUATIONIn any sale pro
Page 45 and 46: SECTION 9-ANOTICE OF CHANGENo emplo
Page 47 and 48: 3. Where an application has been ma
Page 49 and 50: Substantive Clauses:Notwithstanding
Page 51 and 52: Annexure-IAgreement For Advisory Se
Page 53 and 54: NAME) will be paid a drop-dead fee
Page 55 and 56: a) The conflicts of interest and in
Page 57 and 58: 13. Governing LawThis Agreement sha
Page 59 and 60: ii Notwithstanding the foregoing, t
Page 61 and 62: Annexure-IIGuidelines for Advisors
Page 63 and 64: Annexure-IIIEXPRESSION OF INTEREST(
Page 65 and 66: Annexure-IVStatement Of Legal Capac
Page 67 and 68: 10. Salient features of financial p
Page 69 and 70:
qualifying minimum networth criteri
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stage of submission of Expression o
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9. Additional Information9.1 Govern
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Annexure - VIIVALUATION METHODOLOGI
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c) Transaction Multiple Method.d) A
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Equity Risk Premium = Beta * (Marke
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Terminal Value =105 * (1 + 0.05) /
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It was also recognized that valuati
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2.4 Asset Valuation MethodologyThe
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It should be noted that the DCF met
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6 - Disqualification of a bidder by
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PART - III - Udyog Bandhu

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