Disinvestment in India

Abbas Ali
 Introduction

• Meaning of Privatisation

• Meaning of Disinvestment

• Policymakers dilemma
 Global Perspective

• The pendulum of political opinion

• Perestroika

• A new trend of global integration

 Evolution of Public Sector

• Pre Independence

• Post Independence

• Industrial Policy Resolution of 1956

 Main objectives for setting up the
Public Sector Enterprises
• Rapid economic growth

• Return on investment

• Redistribution of income

• Employment opportunities

• Balanced development

• Small-scale and ancillary industries

• Promote import substitutions

 Industries reserved for PSU’s prior to July 1991
1. Arms and Ammunition and allied items of defence equipment
2. Atomic energy
3. Iron and Steel
4. Heavy casting and forging of steel items
5. Heavy plant and machinery required for iron and steel production, for
mining for machine tool manufacture and such other industries as may
be specified by the Central Government.
6. Heavy electrical plant including large hydraulic and steam turbines
7. Coal and lignite
8. Minerals oils
9. Mining of iron ore, manganese ore, chrome ore, gypsum, sulphur, gold
and diamond.
10.Mining and processing copper, lead, zinc, tin molybdenum and wolfram
11.Minerals specified in the Schedule to the Atomic Energy (Control of
Production and Use) Order 1953.
12.Aircraft
13.Air transport
14.Rail transport
15.Ship building
16.Telephones and telephone cables, telegraph and wireless apparatus
(excluding radio receiving sets)
17.Generation and distribution of electricity
 Industries reserved for PSU’s since July
1991
• Arms and Ammunition and allied items of defence
equipment, defence aircraft and warship
• Atomic Energy
• Coal and Lignite
• Mineral Oils
• Mining of iron ore, manganese ore, chrome ore,
gypsum, sulphur, gold and diamond
• Mining of copper, lead, zinc, tin, molybdenum and
wolfram
• Minerals specified in the schedule to Atomic Energy
(Control of production and use) Order, 1953
• Railway Transport
 Industries reserved for PSU’s since
December 2002

• Atomic Energy

• Minerals specified in schedule to atomic Energy

(Control of Production and Use) Order, 1953

• Railway Transport
 Primary objectives for privatising
the PSE’s

• Releasing large amount of public

resources

• Reducing the public debt

• Transfer of Commercial Risk

• Releasing other tangible and intangible

resources
 Other benefits expected from
privatisation

• Expose the privatised companies to

market discipline

• Wider distribution of wealth

• Effect on the Capital Market

• Increase in Economic Activity

 Privatization Process
• Disinvestment commission recommendations

• Consideration of the Cabinet Committee on

Disinvestment (CCD)

• Selection of the Advisor through a competitive bidding

process

• Receipt of the Expression of Interest (EOI) from

advisors

• Advertisement for inviting EOI from bidders

• Short-listing of bidders and signing of confidentiality

 Privatization Process
• Finalization of shareholders’ agreement

• Due diligence by prospective bidders

• CCD, SEBI, Regulatory approvals

• Execution of legal documents and inflow of funds

public offer announcement by strategic partner, as per
SEBI takeover code, wherever applicable
Committees involved on the
Privatization Process
 Cabinet Committee on
Disinvestment (CCD)
• Chaired by the Prime Minister

• Functions:
– To consider the advice of the Core Group of
Secretaries
– To decide the price band

– To decide the final pricing

– Intervention in case of disagreement between

the recommendations
– To approve the three-year rolling plan and the
annual programme of disinvestment
 Core Group of Secretaries on
Disinvestment (CGD)
• Headed by the Cabinet Secretary

• Functions:

– Supervises the implementation of the decisions

of all strategic sales

– Monitors the progress of implementation of the

CCD decisions.

– Makes recommendations to the CCD on

disinvestment policy matters.
 Inter-Ministerial Group (IMG)

• Chaired by Secretary, Ministry of Disinvestment

• Inter-ministerial consultation
 Ministry Of Disinvestment
• Set up in 1999

• Assisted by Advisors

• Business Allocated to Ministry of Disinvestment

– All matters related to disinvestment

– Decisions on the recommendations of the

Disinvestment Commission

– Implementation of disinvestment decisions

 Evolution of the
Disinvestment Policy
 Evolution of the
•
Disinvestment
Interim Budget 1991-92
Policy
• Disinvestment Up to 20% of the Equity in selected PSEs
undertaking was in favour of the Mutual Fund, Financial
and Institutional Investor in

2. Industrial Policy Statement of 24th July 1991

• Government didn’t place restriction in class of investor

nor the equity share capital

3. Budget 1992-93

• Cap of 20% for disinvestment was reinstated and

eligible investor modified to Institutional Investor,
Mutual Fund and Workers in these Firms
 Evolution of the
•
Disinvestment
Rangarajan Committee April 1993
Policy
• It recommended 49% of PSEs Equity to be disinvested
for industries explicitly reserved for the public sector
• Holding of 51% was recommended for only six
industries.

5.   The Common Minimum Programme 1996

• Examine the public sector non-core strategic areas.
• Setting up of Disinvestment Commission
• Transparency

6. Disinvestment Commission Recommendations 1999

• Disinvestment Commission was set up in 1996
• August 1999, 58 PSEs were shifted from Public offering
to Strategic/ Trade sales with transfer of management
 Evolution of the
Disinvestment Policy
7. Strategic & Non-strategic Classification March
1999
• 3 industries were strategic industries and rest
all the industries were non strategic.
• Percentage of disinvestment change in
government stake going down to less 51% or up
to 26% would be case to case.

8. Budget 2000 - 2001

• First time government was ready to reduce the
stake below 26% in a Non Strategic PSEs.

9. Budget 2001 - 2002

• Credit receipt of 12000 crore from
disinvestment next year.
 Evolution of the
Disinvestment Policy
10. Suo – Moto Statement of Shri Arun Shourie
,2002

• Specific aim of Disinvestment Policy

• Disinvestment does not result in alienation of
national assets
• Disinvestment Proceeds Fund
 Major Issues In Disinvestment
Profitability:

• The return on investments in PSEs, at least for the last

two decades, has been quite poor.

• The PSE Survey shows PSEs, as a whole, never earned

post tax profits that exceeded 5% of total sales or 6% of
capital employed,which is at least 3% points below the
interest paid by the Government on its borrowings

Recurring Budgetary support to PSEs:

• Despite huge investment in the public sector, the

Government is required to provide more funds every
year that go into maintaining of the unviable / weak PSEs
 Power & fuel
Cost Control:
/Net sales
PSEs I9.5
• As per NCAER Study
Pvt. sector 5
Report the cost
structure in PSEs is Wages/Net
increasing as Sales
compared to private PSEs 23.3
sector, which is able to
contain costs on all Pvt.sector 6.5
parameters. Interest/Net
sales
PSEs 11.7
Pvt. sector 4.7
Industrial Sickness in PSUs:

• To save the PSUs from sickness, the government

has been sanctioning restructuring packages from
time to time.
• As on 31.3.00 Profit & Loss A/C of 21 PSUs showed
accumulated loss of 13959.57 crores.

Employee issues:

• Of the 1.6 million jobs added in the organized

sector 1 million, or two thirds, were added in the
private sector during the period 1991 to 2000.
• This indicates that the private sector has become
the major source for incremental employment in
the organized sector of the economy over the last
decade
Methods of Disinvestment
 Strategic Sale
Parameters Explanation
Pricing Optimisation / maximisation through
competitive tension and control
Target investor set premium
Investors with strategic fit - techno-
commercial credentials
Transaction costs Low
Time involved 6-10 months
Regulation Companies Act, SEBI Take-over code,
Stock Exchange, RBI regulations,
FIPB clearance (for foreign investors)
Suitability Non-strategic Companies
Companies where Government is
willing to give significant
Precedents management control
MFIL, BALCO, CMC, HTL, VSNL, IBP,
HZL, PPL, IPCL, etc
 Strategic Sale
• Methodology: Structuring the transaction in terms of:

– Extent of stake to be divested

– Extent of management rights
– Decisions on pre qualification criteria, bid
evaluation criteria and bidding process
– Preparation and circulation of information
memorandum to pre-qualified buyers
– Due diligence and preparation of transaction
documents
– Valuation of Assets/shares
– Receiving of bids
– Evaluation of bids
– Signing of Sale Agreement
 Strategic Sale
• Advantages
– Maximises price because of transfer of
management rights
– Brings technical / marketing / financial /
managerial expertise of the buyer to the
company
– Increased value of residual Govt. shareholding
– Low cost and less regulation

• Disadvantages
– Time consuming
– Issues relating to management, land and labour
etc. to be resolved
 Capital Market
Offer For Sale
Offer for Sale To Public Secondary
to Public Through Book Market
Particulars at Fixedbefore
Decided Price Optimized,
Building since Operation
the price is
transaction, at a discovered
discount to through a
Pricing market
Mix of retail and bidding process At market prices
wholesale, with Essentially Essentially
some reservation wholesale but wholesale could
Target Investor for small small investor be retail investor
Set investors
High, in the also in the
High, also
range of range of
2-5% depending 2-5% depending Low, in terms of
Transaction Cost on issue size on issue size brokerage

Time Involved 3 - 4 months 3 - 4 months Spot transactions

SEBI guidelines, SEBI guidelines,
Stock Exchange Stock Exchange Stock Exchange
Regulation requirements requirements requirements
 Capital Market
International Private Placement of
Particulars Offering Equity by merchant
Valuation Auction
banker and feedback
from institutional
investors or price optimised
discovered through through
Pricing Valuation by QIBs book building bidding
Essentially institutional
including multilateral
Target FII (Retail investor also agencies, private Essentially
Investor Set High,
for ADR)
in the range of 2- equity funds institutional
Transaction 5% depending on issue
Cost
Time size
Disclosure requirements Low Low
Involved 3-5Securities
by months Exchange 1-2 months 1-2 months
Commission (SEC) and
accounting in Foreign investment
accordance with US guidelines in case of
Generally Accepted overseas investors,
Accounting Practices SEBI guidelines in case
(GAAP) (for ADRs), of
NASDAQ / NYSE/ LSE domestic listed SEBI Take-
Regulation listing requirements companies over code
 Capital Market

• Offer For Sale To Public Through Book

Building

– Suitability:
• Companies for which institutional interest is
expected to be substantial
• Profit making companies with good intrinsic
value and future prospects
• Companies not in need of significant
technical, managerial, marketing inputs
 Capital Market
• Offer For Sale To Public Through Book
Building

– Methodology: Offer for sale

• Issue of Equity Shares to the public at
large
• Number of securities to be pre-determined
and disclosed
• Price discovery through bidding by
interested investors
• Issue amount is thus automatically
obtained (No. of securities multiplied by
price)
• Issue underwritten by the Syndicate
 Capital Market
• Offer For Sale To Public Through Book
Building

– Advantages
• Optimises price
• Ensures broad based shareholding
• Sets valuation benchmarks for further fund
raising / offer for sale for IPOs
• Relatively quick method - Transparent
method

– Disadvantages
• Expensive - with cost of 2 - 5%
•
 Capital Market
• Secondary Market Operation

– Suitability:
• Companies which have a sizeable floating
stock with good intrinsic value and good
future prospects
• Companies not in need of significant
technical, managerial, marketing inputs etc.

– Methodology: sale through market operations

• A secondary market sale of Equity Shares.
• Through brokers
• To interested buyers - institutional and retail
•
 Capital Market
• Secondary Market Operation

– Advantages
• Low costs - only brokerage to be paid

– Disadvantages
• Unsuitable for Companies with low floating
stock
• Interest may be low
• Price dependent on day to day market
conditions
• Amount of proceeds uncertain - Possibility of
price rigging
• Highly dependent on the day-to-day demand
for the shares
 Capital Market

• International Offering (ADR and GDR)

– Suitability
• Companies which have stocks listed in the
international markets or companies with
actively traded stock in domestic markets

• Companies with good intrinsic value, good

future prospects and of international repute
 Capital Market
• International Offering (ADR and GDR)

– Methodology: offer for sale in the international

markets
• An offer to international investors through issue
of Depository Receipts, which represent
underlying shares (ADRs in the USA market and
GDRs in markets other than the USA)
• Recasting of accounts as per US GAAP for issue
of ADRs and consolidation of accounts for issue
of GDRs
• Preparation of red herring (Offer Document) and
road shows
• Price discovery through bidding and allocations
made at cut-off price (Dutch Auction) or at bid
price (French Auction)
 Capital Market
• International Offering (ADR and GDR)

– Advantages
• Access to deeper international markets and
capital, sometimes at better price.
• Creates price tension between the overseas and
home market
• Enhances visibility

– Disadvantages
• Time consuming process
• Stringent regulatory requirements
• Accounting norms and disclosures and regular
reporting to SEC in case of ADRs
• High cost about 4-5% for ADRs and about 3% for
GDRs
 Capital Market

• Private Placement of Equity

– Suitability
• Unlisted companies
• Listed companies with low floating stock
and low volumes
• Companies with good intrinsic value and
good future prospects
 Capital Market
• Private Placement of Equity
– Methodology: placement of equity
• To a set of institutional investors
• At a negotiated price arrived at through
valuation or price discovery through book
building
• With issues of management rights and exit
option resolved
• Through an information memorandum circulated
among institutional investors and due-diligence
• In case of listed companies as placement of less
than 15% equity to investors does not trigger
Take-over code (as per SEBI guidelines)
 Capital Market
• Private Placement of Equity

– Advantages
• Less time consuming
• No regulatory compliance requirements, except
in case of foreign investment
• Low transaction cost

– Disadvantages
• Does not ensure widespread shareholding
• May not be considered transparent
 Capital Market
• Auction

– Suitability
• Companies with good intrinsic value
• Unlisted companies
• Listed companies with low floating stock
 Capital Market
• Auction
– 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 Dutch Auction
• 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 investor to avoid
 Capital Market
• Auction
– 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 cost

– Disadvantages
• Does not ensure broad based shareholding
 Strategic Sale

Parameters Explanation
Pricing Market determined price, after building
in returns to the warehouses. Profit on
sale, net of selling expenses by
warehouses shared in pre-determined
ratio
Target investor set Essentially institutional
Transaction costs Fixed return to warehouses less cost of
funds for GoI
Time involved within 1 month
Regulation RBI restrictions on bank investments
Suitability Listed companies with adequate
liquidity
Potential for growth in market prices  
Precedents None
 Conversion of
Reduction In Equity
Equity Into
Another
Particulars Buy Back of Shares Instrument
Book value / market
Pricing SEBI Buyback regulations price based
Target Investor Shares bought back by
Set the company Wholesale
Transaction Low- Placement
Cost Low Cost

Time Involved Within three months Up to 3 months

Companies Act, SEBIwith no
Cash rich companies
Regulation Buyback regulations
immediate capex plans Low Companies Act
geared companies with good
intrinsic value, which is not
reflected in accretion to
shareholder value and
Suitability market price
None in Public sector, Indian
Rayon, Reliance Industries
Precedents Limited in private sector
 Reduction In Equity
• Buy Back Of Shares  
– Methodology: Offer by company to buy-back its
shares from others
• Through tender route
• Buy-back at fixed price
• In case of over subscription, acceptance on
proportionate basis
• Through book building
• Buy-back through Dutch Auction route- price
discovery through bidding by interested
investors- and allocations made at cut-off-price
• Valuation to factor in future loss of dividend to
the sellers.  
 Reduction In Equity
• Buy Back Of Shares  

– Advantages
• Reduces capital and thus improves EPS, Book Value
& RoE of the Company post buy-back
• Low cost transaction
• Relatively quick method

– Disadvantages
• Regulatory requirements
• Post buy-back debt equity ratio not to exceed 2: 1
• Maximum number of Equity Shares to be bought
back should not exceed 25% of the existing paid-up
capital
• The maximum amount that can be expected on a
buy-back should not exceed 25% of the Company's
paid- up capital and free reserves
 Reduction In Equity
• Conversion of Equity Into Another
Instrument

– Suitability:
• Cash rich companies with no immediate
capex plans
• Low geared companies with good intrinsic
value which is not reflected in accretion to
shareholder value and market price

– Precedents
• NALCO
 Reduction In Equity
• Conversion of Equity Into
Another Instrument
– Methodology
• Conversion of equity into an attractive and
suitable capital market instrument, plain
vanilla bonds, deep discount bonds, fully /
partially convertible bonds, bonds with
warrants attached, preference shares with /
without warrants
• Preparation and circulation of an information
memorandum (IM) among institutional
investors
 Reduction In Equity
• Conversion of Equity Into Another
Instrument
– Advantages
• Results in improvement in the capital structure
of the Company combined with funds inflow to
seller
• Reduces capital & thus improves EPS, Book
Value & RoE of the Company
• Low cost of transaction
• Relatively quick method
• No reduction in cash surplus with the Company

– Disadvantages
• More regulatory compliance requirements for
listed companies
 Other Methods
• Trade Sale 

• Asset Sale and Winding up

• Management/Employees Buyout
(M/EBO)

• Cross Sale

• Sale through Demerger/Spinning off

Valuation
 Valuation
• Introduction

• Valuation of a PSU

• Valuation is a subjective
          Disinvestment
Commission's
Recommendations
• 3 Methods of valuation approved by
the Disinvestment Commission

4. Discounted cash flow

5. Relative valuation' approach
6. Net asset value' approach
 Discounted Cash Flows

The Discounted Cash Flow (DCF)

methodology expresses the present
value of a business as a function of
its future cash earnings capacity.
This methodology works on the
premise that the value of a business
is measured in terms of future cash
flow streams, discounted to the
present time at an appropriate
 Free Cash Flow
By deducting the total of annual tax
outflow inclusive of tax shield
enjoyed on account of debt service,
incremental amount invested in
working capital and capital
expenditure from the respective
year’s profit before depreciation
interest and tax (“PBDIT”) for the
explicit period
 Profit and loss account of
Company X for the first year of
business projections
  Particulars Rs million  
Revenue   
Sales receipts  500 
Expenses   
Consumption of material  300 
Other overheads  50 
Total expenses 350
PBDIT 150
 Computation Of FCF
   Year 1  Year 2  Year 3  Year 4  Year 5 
FCF computation for 
Company X  Rs   Rs   Rs   Rs  Rs 
million  million million million million 

PBDIT of Company X 
150 200 300 400 500
Less: Income tax -20 -40 -60 -80 -100
(assumed)
Less: Capital expenditure -50 -50 -50 -50 -50
(assumed)

* Notice that a growth has been assumed in the PBDIT

Less: Incremental -25 -50 -75 -100 -125
working capital
(assumed)
FCF  55  60  115  170  225 
 Weighted Average Cost of
Capital
Cost of equity
• Risk Free Rate
• Beta
• Equity Risk Premium

Cost of Equity =Risk Free Rate + (Equity Risk

Premium*Beta)

Cost of debt
• Estimated Corporate Tax Rate
• Comp’s Pre-Tax Cost of Debt
• Comp’s After-Tax Cost of Debt
• Target Debt equity ratio
Weighted Average Cost of Capital
(‘WACC’)

WACC = (Debt/Total Capital)*(After-

Tax Cost of Debt) + (Equity/Total
Capital)* (Cost of Equity)
 WACC calculation for Company
X
Cost of Equity  Assumptions
Risk Free Rate 9.00% 10-year Treasury GoI Bond Yield

Beta 1.50 Unlevered beta of industry

comparables levered to Company X
debt equity ratio (high risk stock!)

Equity Risk Premium 9.00% Total Stock Returns less Treasury

Bond Total Returns. Market Risk
Premium is equal to the difference of
average market return and risk free
rate. Average market return has
been assumed to be 18% and beta
has been assumed to be 1.5.

Cost of Equity 22.50%  = Risk Free Rate + (Equity Risk

Premium*Beta)
Cost of Debt 

Estimated Corporate 35.70% Current corporate tax rate in

Tax Rate India

Comp’s Pre-Tax Cost of 16.50% Cost of debt provided by the

Debt Management

Comp’s After-Tax Cost 10.61%  Pre-Tax Cost of Debt*(1-Tax

of Debt Rate)

Target Debt equity ratio  1.00 Average debt equity ratio of

Company X for past five years

WACC  16.55%  (Debt/Total Capital)*(After-Tax

Cost of Debt)+ (Equity/Total
Capital)*(Cost of Equity)
 Discount factor
Discount factor = Discount factor of previous year /(1 +
WACC)

In year 1, the discount factor is equal to 1.Thus, the

discount
factor of Company X for the first year will be as follows:

Discount factor for year 1 =  1 / (1 + 0.1655) = 0.858

Discount factor for year 2 = 1 / (1 + 0.1655)2 =

0.736
DCF computation for Year 1 Year 2 Year 3 Year 4 Year 5
Company X

   Rs  Rs  Rs  Rs  Rs 

million   million   million   million   million  
FCF 55 60 115 170 225

Discounting  factor 
based on WACC  0.858  0.736  0.632  0.542  0.465 
Discounted cash flows
47 44 73 92 105
 Primary value and Terminal Value

• Primary value arrived through the submission of the DCF

of the explicit period is known as the primary value The
primary value of the business of Company X as
computed above is Rs 361 million.

• Terminal Value reflects the average business conditions

of the Company that are expected to prevail over the
long term in perpetuity
 Terminal price Formulation

Terminal Value = Terminal Cash flow (for last year of explicit

period) * (1 + g)
Discount Factor - g

Where;
Discount Factor = Weighted Average Cost of Capital, and;

g = Estimate of average long term growth

 Terminal price Formulation

• Rate of cash flows in perpetuity assumed to

be 5%

• Terminal Value =  105 * (1 + 0.05) /

(0.1655 - 0.05) = Rs. 951 million

• The terminal value is further discounted to

find the "Enterprise Value"
Valuation of Company X based on DCF methodology   Rs million 

Primary value 361

Terminal value 951

Enterprise value  1,311 

Add: Value of surplus land outside factory area

(assumed)@ 200
Less: debt (assumed)
-600
Equity value of Company X 
911 
 DCF methodology is the most appropriate
methodology in the following cases

• Business is being transferred /

acquired

• Business possesses substantial

intangibles

• Business is not being valued for the

substantial undisclosed assets
 Balance Sheet Method
• The Balance sheet or the Net Asset
Value methodology values a
business on the basis of the value
of its underlying assets

• This method is pertinent where:

• The value of intangibles is not

significant
• The business has been recently set
 Balance Sheet Method
Limitations for the method

• When the financial statement sheets do not reflect the

true value of assets

• Intangibles are major part of the value of the company

• Changes in industry, market or business environment

 Market Multiple Method
• This method takes into account the traded or
transaction value of comparable companies in the
industry and benchmarks it against certain
parameters, like earnings, sales, etc.

• Parameters used are

• Earnings before Interest, Taxes, Depreciation &

Amortisations
• Sales
 EBITDA Multiple
• EBITDA multiple = Enterprise Value
/EBITDA

• Enterprise Value (EV) = Market value of

Equity + Market value of Debt

• If we are valuing Company X with

EBITDA of Rs. 150 million and in a
similar transaction EV/EBIDTA has been
10 (EBIDTA then debt would be
deducted to arrive at the equity value
then debt would be deducted to arrive
at the equity value of Company X.
 Sales multiple
• The sales multiple techniques are based on a similar
analysis of relevant acquisitions and are the ratio of
Enterprise Value to the current sales (net of excise
duty, sales tax and non-recurring extra- ordinary
income)

• Sales multiple = Enterprises Value / Net sales of the

current year

• If we are valuing Company X with sales of Rs. 500

million and in a similar transaction EV/Sales has been
4 (Sales multiple) then EV of Company X would be
worked out as Rs. 2000 million Then debt would be
deducted to arrive at the equity value of Company X
 Asset Valuation
Methodology
• Estimates the cost of replacing the
tangible assets of the business

• Indicator of the entry barrier that

exists in a business

• Useful in case of liquidation/closure

of the business
Asset Valuation of Company X Rs million 
Part A: Immoveable assets (valued by Government
approved valuer)   
Value of buildings in factory area  100 
Value of buildings at staff colony  50 
Value of surplus land outside factory area  200 
Part B: Moveable assets (valued by Government
approved valuer)    
All moveable assets  250 
  600
Add: Other assets as per latest balance sheet   
Value of current assets as per last audited accounts  300 
Cash balance as per last audited accounts  250 
   550
Less: Liabilities   
Estimated  Voluntary  retirement  scheme  cost  for  all  -250 
employees 
Total  outstanding  borrowings  including  bank  loans,  -650 
government  loans,  current  liabilities  (trade  creditors,  non 
trade creditors and statutory liabilities) 
  -900
Equity value 250
Case Studies
Privatization In Power Sector
 Pre-Reform Stage

• The Electricity Act 1948

• The objective of the 1948 Act

• Vertically integrated electricity board .

• Mounting losses of State Electricity Boards (SEB)

• SEB colossal arrears to central public sector

undertakings
 Need for Reforms

• Most of the electric power utilities are vertically

integrated monopolies with large losses and other
operational shortcomings

• Government's interference in the sector, makes it

difficult to enforce collection and prevent theft, and
increases the cost of supplying electricity to very
high levels.

• The resulting overall subsidies to the sector are so

large that they crowd out other public expenditures.
 Need for Reforms
• Low tariffs, particularly for households and farmers,
leave utilities without sufficient resources to
address problems of poor quality, availability, and
reliability so customers are unwilling to pay the
higher tariffs needed to remedy these problems.

• Industrial consumers in India are made less

competitive because of the large cross-subsidies
and poor conditions of power supply, i.e., frequent
power outages and unreliable availability.
 Post-Reform
• The reforms began 1991 although at the wrong end
of generation instead of distribution of power.

• The Electricity Laws (Amendment) Act, 1991--

Notification. Amends the Indian Electricity Act, 1910
and the Electricity (Supply) Act, 1948.

• Private Sector allowed to establish generation

projects of all   types   (except nuclear).

• 100% foreign investment & ownership allowed.

 Background to the Reform in
Orrisa

• High transmission and distribution losses.

• Inadequate accountability for various segments

(generation, transmission, and distribution).

• Poor financial performance, poor quality of service

and manpower related issues.
 Reform Agenda

• The State Government of Orissa pioneered Reform

and Restructuring in the power sector by
introducing POWER SECTOR REFORM ACT,1995.

• To make power supply more efficient and to be able

to meet the investment needs of the sector.

• To have privately managed utilities operating in a

competitive and appropriately regulated power
market.
The Scope Of The Reform Program

• Unbundling and structural separation of generation,

transmission, and distribution into separate services to be
provided by separate companies.

• Private sector participation in the new hydroelectric

generation and transmission utilities, the Grid Corporation
of Orissa (GRIDCO) and the Orissa Hydro Power
Corporation (OHPC)

• Privatization of thermal generation and distribution

• Competitive bidding for new generation

• Development of an autonomous power sector regulatory

agency called OERC
 Problem with Reforms in Orissa

• Generation was made more attractive by increasing

the price charged to Transco who in turn was not
allowed to pass on the price increase to the
Distribution Companies.

• Revenues from privatisation were not ploughed

back into the sector but absorbed into the
government budget for other purposes.
 The Lessons From Orissa

• There was need for full and sustained political

administrative and financial support to the
Distribution Companies in their efforts to improve
and run the electricity distribution business.

• This support would enable them to disconnect

illegal consumers, reduce theft and improve
collection efficiency

• Baseline data required to be reasonably correct

• Multi-year year regulation was called for to reduce

regulatory risk and uncertainty.
Issues Orissa Experience How  they  have  been  addressed  in  the 
Delhi Model
Government Commitment Govt Distanced itself as Govt has shown good commitment to the
soon as the privatization success of the Reform Process-
took place •Clear cut policy directions for 5 years
•Committed support- about Rs 2600 Crs
•Antitheft legislation to be enacted
Loss Levels •Base line data mismatch Concept of “AT &C” losses to
•Difficulty in segregating •Reduce scope for baseline data errors
losses •Provide more realistic loss levels
•Provide greater comfort & since
approved by commission
Receivables •Unrealistically high •Limited to last month’s receivables
•Past receivables to the account of
Holding Company- No obligation to
collect ( 20% incentive on amount
collected)
•Level of Receivables in line with the Avg
monthly billing of the last 6 months
Regulatory Involvement •No prior involvement •Full involvement from the beginning
•Indicated amenability to the reforms
process
•Policy Directives accepted in BST order
•Recognition of Discom in BST order
Asset Valuation •Assets revalued at higher •Assets valued through Business
value prior to bidding Valuation based on revenue earning
process potential
Collection Losses
 Airport Privatization

Delhi and Mumbai Airport

 Objectives of Airport Privatization

• Providing world class infrastructure without the

need to invest heavily on the part of the
Government

• Increasing the operational efficiency of the

airports

• Meeting the rapid growth in Passenger Numbers

• Bringing International Expertise in Airport

Development and Management

• Increasing the capacity of the present airports

 Timeline – Pre Bidding
Process
• 1996 – Modernization of Delhi and Mumbai airports
considered by the Airports Authority of India (AAI)

• 1998 – The Prime Minister made a declaration that

world class airports should be set up in the country

• 1999 – A task force on infrastructure recommended

that a long term lease for outsourced management
should be considered. They were not in favor of
corporatization

• June and July 2003 – The AAI board approved a

modernization proposal costing Rs. 30 billion through
the privatization route for Delhi and Mumbai airports.
The lease agreement was signed for a minimum
period of 30 years. Extendable to another
30 years
 Government Objectives and
Decisions
Key Transaction Objectives
• World Class Development and Expansion The winners
would not be the
• World Class Airport Management same

• Timely completion and certainty of closure

 

• Appropriate regulation - achieving economic regulation of

aeronautical assets that is fair, commercially and
economically appropriate, transparent, predictable,
consistent and stable while protecting the interests of users
and ensuring that the airports are operated in accordance
with world standards

• Fair and equitable treatment of AAI employees, including

preservation of accrued entitlements
 

• Diversity of ownership between Delhi and Mumbai

 Timeline – Pre Bidding
Process
• September 2003 – Restructuring of the Mumbai
and Delhi Airport was approved by the then NDA
Government and a long term lease on the basis of
Joint Venture was established

• November 2003 – The Ministry of Civil Aviation

(MoCA) constituted the IMG in October 2003 to
assist the EGoM. The then EGoM met on November
09, 2003.

• December 2003 – The EGoM approved the

appointment of ABN Amro as the financial
consultants (FC) and Air Plan as the Global
Scope of the Committees Involved in the
Bidding Process

• Empowered Group of Ministers (EGoM)Constituted by the

– Scope: NDA and
Reconstituted by the
• Decisions on key issues UPA.
• Build consensus among various allies of the
ruling coalition government

Constituted by the
• Inter-Ministerial Group (IMG) MoCA to assist the
EGoM
– Scope:
• Bureaucratic team overseeing the transaction
• Debate key issues with representative of
various ministries
• Approve draft put up by execution team and
transaction approach
Scope of the Committees Involved in the
Bidding Process
Evaluation Committee (EC)
Constituted by the
– Scope: IMG
• Originate transaction structure
• Pre-qualification criteria
• Co-ordination with bidders
• Finalize transaction structure and invite bids
• Negotiate with bidders and finalize documents
• Move final documents for appropriate GoI
approvals

The Evaluation Committee also consisted of

ABN Amro as the Financial Consultant and Air
Scope of the Committees Involved in the
Bidding Process

• Government Review Committee (GRC)

Constituted by the
MoCA for evaluating
– Scope: the EC Report

• Independent review of the evaluation

undertaken by the EC

• Committee of Secretaries (CoS) Constituted by the

MoCA for evaluating
– Scope: the EC Report

• Recommend the selection of appropriate joint

venture partners
Scope of the Committees Involved in the
Bidding Process Constituted by the
CoS since it did not
have the technical
• Group of Eminent Technical Experts (GETE)
expertise
– Scope:
• Overall validation of the evaluation process

• To answer the issues raised by the Members

of IMG about the evaluation process

• An overall technical assessment of

transparency and fairness of the evaluation
process, including steps required, if any, to
achieve a transparent and fair outcome

• Suggestions for improving the selection

procedure for Joint Venture Partners in future
 Time Line – Pre Bidding
Process
• February 2004 – An Invitation to Register an
Expressions of Interest (ITREOI) for acquisition of 74
per cent equity stake in the Joint Venture Company
(JVC) was issued

• May 2004 – The country went for general elections

in May 2004, resulting in the change of
government to the United Progressive Alliance (UPA).
The UPA coalition government was supported by the
Left parties, but from outside the government. The
EGoM was reconstituted

• The EGoM put a cap of 49 per cent on foreign direct

investment within the 74 per cent of the private equity
in the JVC.

• Equity participation of Indian scheduled airlines was

 Time Line – Pre Bidding
Process

• July 2004 – Ten bidders submitted EOIs by July 20,

2004

• April 2005 – The EGoM approved key principles of

the RFP document along with the draft transaction
documents. The RFP document for Delhi and
Mumbai airports and the draft transaction
documents were issued to nine PQBs
 Transaction Documents
Operation Management and Development
Agreement (OMDA)

• Under this agreement the AAI granted the right to

undertake the functions of operating, maintaining,
developing, designing, constructing, upgrading,
modernizing, financing and managing the airport to
the JVC

• The OMDA contained a list of aeronautical and

permitted non-aeronautical activities that the JVC
should undertake, and a list of ‘reserved activities’
(being governmental sovereign functions like customs,
Non-aeronautical
activities
immigration etc) that the JVC may notrestricted to
undertake.
5% of the total land in
Stand alone commercial activities also were not
Delhi and 10% of total
permitted. land in Mumbai
Airport Operator Revenue
Streams
 Transaction Documents
Operation Management and Development
Agreement (OMDA)

• The documents provided for a period of 3 months

• The current employees of AAI would be restricted for a

minimum period of 3 years

• The agreement prescribed objective and subjective

quality standards and the time frame within which this
should be achieved

• The JVC was to first submit a master plan before the

expiry of six months from the date of execution of the
OMDA and thereafter update and resubmit the same
periodically, every 10 years. The master plan was
 Transaction Documents
Operation Management and Development
Agreement (OMDA)

• It would be the responsibility of the JVC to arrange for

all the clearances that were required by the applicable
laws. The government in order to facilitate the process
would provide a single window scheme

• In case the construction of another airport was

considered within 150 kms radius of the existing
airport the JVC would have the RoFR
 Transaction Documents
Lease Deed (LD)

• According to the LD, the land would be leased for

a period of 30 years from the effective date and
would, in the event the JVC renewed the term of
the OMDA, be renewed for an additional period of
30 years.
 Transaction Documents
Shareholders Agreement (SHA)

• The AAI, GoI and PSUs would hold 26% of the total
share and the private participants would hold 74%.

• Foreign shareholding was restricted to 49%.

• Scheduled airlines equity cap was restricted at

10% of aggregate shareholding of all scheduled
airlines, while foreign airlines could not have any
share holding.

• The JVC was to have an authorized share capital of

Rs 2.5 billion with an initial subscription of Rs 2.0
billion.
 Transaction Documents
State Support Agreement (SSA)

• This document provided the details of the various rules,

regulations and other regulatory compliances
of the JV with respect to the State.

State Government Support Agreement (SGSA)

• The SGSA would be between the respective state

governments (Maharashtra/Delhi) and the JVC

• The state governments intended to make best efforts

in providing support to the company and
AAI on matters relating to
encroachments, additional land for airport
development, surface access to airports,
provision of utilities, safety and security
List of Bidders
 Criteria for the Bidders
• Consortium Related Matters Minimum of Rs 5
– Networth billion
– Lead Member of the Consortium
– Entities in a Disqualified Consortium
Atleast one
– Airport Operator Operator

• Ownership Restrictions
– Cross-Ownership
– Airline Participation
– Foreign Ownership
– Lock-in

• Bid Structure
Evaluation Process of the
Bids
 Assessment Any bidder not meeting
the
of Mandatory mandatory requirement
Requirement will
have its offer removed
fromand equity
Debt
Assessment further consideration
commitment is evaluated
of Financial and offers not meeting
the requirement are
Commitment excluded from further
Technical Pre
consideration
Qualification
All remaining offers are
•Management Capability, assessed on technical pre-
Commitment and Value qualification criteria and
Added only those assessed with
technical pre-qualification
•Development Capability,
on each of the two criteria
Commitment and Value of 80% or more proceed to
Added phase 4 of the bidder
The offer
Assessment with the highest financial
of Financial consideration for the
Commitment airport is selected as
the successful bidder
 Assessment of Mandatory
Minimum of Rs 5
Requirement billion
• Confirmation that the net worth criteria of the
bidder as per the requirement in the ITREOI
document continues to be fulfilled.
 
• No consortium member is participating in more
than one consortium bidding for the same airport
 
• Consortium has an airport operator who has
relevant and significant experience of operating,
managing and developing airports

• Confirm that the offer commits to the mandatory

capital projects and the initial development plan is
in accord with the development planning principles
and the traffic forecasts
 Assessment of Mandatory
Requirement
• Equity ownership in the joint venture company by a
scheduled airline and their group entities are in
accordance with the prescribed limits
Restricted to
10%
• FDI in the JVC does not exceed 49%
 
• Minimum equity ownership by Indian entities (other
than AAI/GoI public sector entities) in the JVC is 25%
 
• Provision of suitable probity and security
statements
 Assessment of Financial
Commitment
• It is necessary that the potential partners of the JV
are capable to fund the required development.
Offers which do not
meet these
requirements would
• The evidence of Capability: be disqualified
– The consortium members provide written
commitment from their ultimate holding
company that the level of equity funding
required from their subsidiaries for the first
seven years of the implementation of the initial
development plan is guaranteed.

– Each member shall separately certify its equity

commitment
 

– Committed bank lending must be available for

the level of debt required for the first seven
years of the implementation of the initial
 Assessment of Technical Pre-
Qualification
• The purpose of the technical pre-qualification phase
is to ensure that only those bidders that can
address the GoI’s strategic objectives are evaluated
at the final phase of the evaluation process

• Only bidders satisfying the benchmark of 80%

under the technical pre-qualification requirements
are allowed into the final phase of evaluation.

• This phase is sub divided into 2 sections, which are:

– Management Capability, Commitment and Value

Add

– Development Capability, Commitment and Value


Management
Capability
•Experience of the
nominated Airport Operator
(25)
•Experience of other Prime
Members (12.5)
Management
Commitment
•Commitment of Airport
Operator (12.5)
•Commitment of other
Prime Members (12.5)
Management Value
•HR Approach Add
(12.5)
•Transition Plan (12.5)
•Stakeholder Management
(6.25)
•Environmental
Management (6.25)
Development
•Master Capability
Planning
Experience (7.4)
•Major Airport
Development Experience
(15)
Development
•MasterCommitment
Planning (7.4)
•Major Airport
Development (7.4)
•Indian Infrastructure
Development (7.4)
Development Value
•Long Term AddVision (8.9)
•Development Path (8.9)
•Flexibility (8.9)
•Aeronautical Operations
(8.9)
•Development Initiatives
(8.9)
Business Plan
•Quality of the Business
Plan (11)
 Scores Received by the Bidders
Bidder Management Capability, Development Capability,
Commitment and Value Commitment and Value
Add Add
Delhi Airport
Reliance-ASA 80.2 81
GMR-Fraport 84.9 80.1
DS Construction-Munich 72.7 69.9
Sterlite-Macquarie-ADP 57.0 61.9
Essel-TAV 39.2 40.3

Mumbai Airport
Reliance-ASA 80.4 80.2
GMR-Fraport 84.9 92.7
DS Construction-Munich 72.7 54.1
Sterlite-Macquarie-ADP 57.0 55.1
Essel-TAV 37.1 28.3
GVK-ACSA 75.8 59.3
 Assessment of Financial
Consideration
• Offers are sought on the basis of an annual Operation
Management and Development Agreement fee
payable as a percentage of gross revenue,
aeronautical and non-aeronautical.

• A minimum OMDA fee of 5% of gross revenue has

been set, which will be subject to bidding.

• 2 conditions of conflict which may arise:

– Where the same bidder is the highest bidder for
both the airports
– Where the same bidder is the highest bidder for
both the airports and the margin between the first
and the second offer is the same.
 Timeline – Post Bidding Stage
• September 2005 – The AAI employees called for a
nationwide strike, protesting against the
privatization which was called off later during the
day
 
• October 2005 – The MoCA constituted a GRC to
evaluate the EC report.

• November 2005 - The EC placed its reports before

the IMG, announcing the two short listed consortia
as Reliance-ASA and GMR-Fraport based on the
qualifying marks of 80%.

• Objections were raised on the credibility of the

 Reply to the Objections
• “A majority of the evaluation criteria, as stipulated in the
RFP documents, are necessarily subjective in nature and
therefore it would have been difficult to allocate a purely
objective marking across all bidders.”

• The system of awarding marks should be on

'consensus opinion' rather than by working out
averages of marks given by individual evaluators

• The EC had deviated from the RFP documents while

considering evaluation

• “There was also concern about the fact that one of the
bidders (DS Construction) who had selected Munich
airport as a partner was rejected, while another
(Reliance) who selected ASA, Mexico had actually
qualified …This was in spite of the fact that Munich
airport is ranked much higher than Mexico.”
 Reply to the Objections
• It went on to add that the IMG had reached a
consensus on asking the GMR-Fraport consortium to
confirm the names of the people who would
undertake key management and development roles
in view of the multiple nominations in each position
for both airports.
 Time Line – Post Bidding Stage
• The MoCA after considering the recommendations of the
GRC directed the EC to re evaluate the scores of the
bidders. The re evaluated scores are as under
Bidder Management Capability, Development Capability,
Commitment and Value Commitment and Value
Add Add
Old New Old New
Delhi Airport
Reliance-ASA 80.2 80.9 81 81
GMR-Fraport 84.9 84.7 80.1 80.1
DS Construction-Munich 72.7 73.1 69.9 70.5
Sterlite-Macquarie-ADP 57.0 57 61.9 61.9
Essel-TAV 39.2 37.6 40.3 41.4

Mumbai Airport
Reliance-ASA 80.4 81 80.2 80.2
GMR-Fraport 84.9 84.7 92.7 92.7
DS Construction-Munich 72.7 73.1 54.1 54.7
Sterlite-Macquarie-ADP 57.0 57 55.1 65.1
Essel-TAV 37.1 35.5 28.3 29.4
GVK-ACSA 75.8 76 59.3 59.3
 Timeline – Post Bidding Stage

• December 2005 – Several Objections were raised in

the revised scores by various political allies and
bidders whose interests were affected.

• January 17, 2006 – The GETE submitted their

second report. As expected, while the marks for the
other bidders did change none other than GMR-
Fraport scored more than 80%. The relative
rankings based on the total of the ‘management
development’ and ‘technical development’ scores
remained the same.
Bidder Management Capability, Developmenta Financial
Commitment and Value l Capability Bid
Add
Pre GETE Post GETE
Delhi Airport
Reliance-ASA 80.9 74.8 81 45.99
GMR-Fraport 84.7 81.7 80.1 43.64
DS Construction-Munich 73.1 73.3 70.5 40.15
Sterlite-Macquarie-ADP 57 53.5 61.9 37.04
Essel-TAV 37.6 40.4 41.4 Bid not
opened

Mumbai Airport
Reliance-ASA 81 74.8 80.2 21.33
GMR-Fraport 84.7 81.7 92.7 33.03
DS Construction-Munich 73.1 73.3 54.7 28.12
Sterlite-Macquarie-ADP 57 53.5 65.1 Bid not
opened
Essel-TAV 35.5 38.3 29.4 Bid not
opened
GVK-ACSA 76 73 59.3 38.7
 Timeline – Post Bidding Stage
January 2005 - The following decisions were made:
• GMR-Fraport chose Delhi airport and matched the
highest bid of Reliance ASA.

• GMR-Fraport was selected for Delhi airport

• Mumbai airport was awarded to GVK-ACSA.

February 2005 – Reliance Airport Developers Pvt. Ltd.

Filed a writ petition in the High Court of Delhi making
several allegations against AAI

• The Court rejected this plea on the primary ground that

the EGoM had absolute discretion in the matter of
choosing the modalities
 Lessons Learnt
• A lot of thought should be given to the RFP
including the bid structure, constitution of
committees and contingency planning (especially if
none or only one had qualified).

• Proper weightages should have been assigned to

the sub factors

• Norms during the bidding process need to be

specified and complied with.

• Committees should be given sufficient autonomy to

make decesions
HUL – Modern Foods
 Introduction
• MFIL was incorporated as Modern Bakeries (India)
limited in 1965.

• It had 2042 employees as on 31.1.2000

• It went through minor restructuring during 1991-94

when its Ujjain Plant was closed, the Silchar project
was abandoned and the production of Rasika drink
was curtailed.

• The company was referred to Disinvestment

Commission in 1996. In February 1997, the
Commission recommended 100% sale of the
company, treating it in the non-core sector.

• As per the Disinvestment Commission the major

 The Disinvestment Process

• September 1997 – The Government approved

50% disinvestment to a Strategic Partner
through competitive global bidding

• October 1998 – ANZ Investment bank was

appointed as the Global Advisor for assisting in
disinvestment

• January 1999 – The Government decided to

raise the disinvestment level to 74%

• April 1999 – An advertisement inviting the EOI

from prospective strategic partners was issued
 The Disinvestment Process

• In a response to the advertisement 10 parties

submitted Expressions of Interest

• Out of these, 4 conducted the due diligence of the

company, which included visits to Data Room,
interaction with the management of the MFIL, and site
visits.

• October 1999 – Post due diligence, 2 parties

remained in the field, and on the last day for
submission of the financial bid (15.10.99), the only bid
received was that from Hindustan Lever Limited (HLL).

• January 2000 - The Government approved the

selection of HLL as the strategic partner in and the
deal was closed on 31.1.2000.
  PRIOR TO SALE   AFTER SALE
1 Authorised share capital Rs. 15.00 cr. 1. 74% of the shares sold for
. Paid up capital Rs. 13.01 cr. Rs. 105.45 cr. and further
Losses 1998-99 Rs. 6.87 cr Rs. 20 cr. Invested by HLL
Losses 1999-00 Rs. 48.23 cr ** in the company.
**(Inclusive of an amount of Rs.
35.19 cr. towards provisions made
for previous years.) Number of 2042
employees
2 Net Worth (and total expected 2. Thus, the Government
. realisation) as per DPE Survey gained by selling Rs. 1000
1998-99 Rs. 28.51 cr. shares for Rs. 11,490,
Value of assets as per 31.3.99 i.e.more than 11 times the
accounts: face value & 3.68 times
Gross Rs. 38.76 cr. the Book Value.
Net Rs. 18.99 cr.
Market value of land & building as
per Government valuer Rs. 109.00 cr.

3 Valuation of 100% equity by Rs. 30 cr. to 3. HLL's share value went up

. different methods - as done by Rs. 70 cr. from Rs. 2138 on 30th
global advisors Dec. (prior to sale) to Rs.
3247 on 25th Feb. (post
sale).
PRIOR TO SALE POST SALE

. 4. The employees of a
company incurring losses
became HLL employees
- an efficient company.
The Shareholders’
Agreement envisages:"
the parties envision that
all employees of the
company on the date
hereof will continue in the
employment of the
company."
  5 Company referred to
BIFR, which was
inevitable. Now HLL will
pick up the bill for
restructuring.
 Post Disinvestment Scenario
• The decline in the sales of Modern Bread, which
continued till the beginning of 2000, has been
arrested. Weekly sales in December 2000 were around
44 lakhs SL, which is a 100% increase over the figure
of April 2000.

• As on 31.12.2000, HLL has extended secured

corporate loans to MFIL to the extent of Rs. 16.5
crores for meeting the requirement of funds for
working capital and capital expenditure.

• HLL has provided a corporate guarantee to MFIL's

banker, viz., Punjab National Bank, which has helped
the Company in getting the interest rate reduced
considerably to the extent of 3-4% of its earlier
 Post Disinvestment Scenario
• Steps have been taken to improve the quality of
bread, its packaging and marketing with trade-
promotion activities, and to train the manpower in
quality control systems.

• November,2002 wages have increased by an average

of Rs.1800 per employee.

• Rs. 30 crore has been spent VRS Rs. 7 crore  infused

for safety & hygiene purposes at various
manufacturing locations  

• The Government was also entitled to ‘Put’ its share of

remaining equity of 26 % at Fair Market Value for 2
years from 31st  January 01 to 30th January 03.  The
 Post Disinvestment Scenario
• Despite HUL’s best efforts MFIL continued to make losses,
HUL has invested 157 crore in MFIL’s equity

• In 2005, its losses were Rs 15 crore and accumulated losses

were Rs 79 crore.

• At the operating profit level, before interest and

depreciation, it did make a profit though of Rs 22 crore
compared to a loss of Rs 7 crore in the previous year.

• Bread sales grew by about 7%. The company suffered as it

lost some lucrative government contracts and changed its
operational structure. Hence overall sales declined by 35%
to Rs 95 crore.

• However, HUL did enjoy tax benefits as MFIL was a sick

industrial unit

• The company put MFIL on the block in 2006 but failed to

 Reasons for the Failure
• However, HUL still was unsuccessful in turning
around the business and due to high employment
costs and low margins

• As per the company,

– The culture of MFIL was a complete misfit with its own
– The company has committed a mistake while conducting
the due diligence process
Thank You