PART - III - Udyog Bandhu

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enchmark the extent of such liabilities. An environmental due diligence/audit was conductedby an international agency prior to the strategic sale of Bharat Aluminium and Co. (BALCO)and Hindustan Zinc Ltd. which facilitated their smooth sale and good price to the Government.3.5 MonitoringThere shall be a Inter departmental Disinvestment/ Privatization Committee chaired by theIndustrial Development Commissioner for monitoring implementation of the process as per theabove decision of the Cabinet/ CCD. The Administrative Department shall responsible forimplementation of the process. The Monitoring Committee may for its assistance engage aseparate Escort Consultant/ Monitoring Consultant as provided in Part -I. of these guidelines orwhich may use the original Lead Advisor for these purposes.104
CHAPTER -IVVALUATIONIn any sale process, the sale will materialise only when the seller is satisfied that the pricegiven by the buyer is not less than the value of the object being sold. Determination of thatthreshold amount, which the seller considers adequate, therefore, is the first pre-requisite forconducting any sale. This threshold amount is called the Reserve Price. Thus Reserve Price isthe threshold amount below which the seller generally perceives any offer or bid inadequate.Reserve Price in case of sale of a company is determined by carrying out valuation of thecompany. In companies that are listed on the Stock Exchanges, market price of the sharesserves as a good benchmark for assessing the fair value of the company, though the marketprice is usually characterized with significant short-term variance due to investor sentimentsbeing influenced by short-term events and environmental aspects. More importantly, most ofthe PSUs are either not listed on the Stock Exchanges or command extremely limited tradedfloat. They are, therefore, not correctly valued. Thus, deciding the worth of a PSU is indeed achallenging task.Valuation of a PSU is different from establishing the price for which it can be sold. While thefair value of an asset is based on the assessment of intrinsic value accruing from fundamentalson a stand-alone basis, varying return expectation and underlying strategic aspects for differentbidders could influence the price. A purchase and sale would be possible only when two partieswhile forming different views as to the value of an asset, are eventually able to reachagreement on the same price. It would be better appreciated by recognition of the fact thatGovernment can only realise what a buyer is willing to pay for the PSU, as the purchase priceultimately agreed reflects its value to the buyer.Another notable point is that valuation is a subjective figure arrived at by the bidder byleveraging his strengths with the potential of the company. Depending on the level of businesssynergy with the target company, perception of specific value realization and varyingassessment regarding productivity, capex, etc., this figure may vary from bidder to bidder.The valuation of assets to be carried out by two independent, reputed valuers shall be done asper Govt. of India guidelines placed at Annexure VII.105
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 18 and 19: - Enhances visibilityDisadvantages-
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: Similarly if the closing date debt
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
Page 71 and 72: stage of submission of Expression o
Page 73 and 74: 9. Additional Information9.1 Govern
Page 75 and 76: Annexure - VIIVALUATION METHODOLOGI
Page 77 and 78: c) Transaction Multiple Method.d) A
Page 79 and 80: Equity Risk Premium = Beta * (Marke
Page 81 and 82: Terminal Value =105 * (1 + 0.05) /
Page 83 and 84: It was also recognized that valuati
Page 85 and 86: 2.4 Asset Valuation MethodologyThe
Page 87 and 88: It should be noted that the DCF met
Page 89: 6 - Disqualification of a bidder by

PART - III - Udyog Bandhu

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