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  • Daily Dose v2.0

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    Ratan
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    Suresh started an education venture for underprivileged children after retiring from a corporate career and getting an MBA. The venture gained traction and secured $500 million in funding. Suresh realized he needed an expert in content creation, so he gave a 5% stake in the company to Phani in exchange for Phani's support. This is an example of an equity carve-out, where owners partially divest interest and sell a minority stake to an outsider. A recent example is ICICI Bank reducing its stake in ICICI Lombard General Insurance while it was merging with Bharti Axa.

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    Suresh started an education venture for underprivileged children after retiring from a corporate career and getting an MBA. The venture gained traction and secured $500 million in funding. Suresh realized he needed an expert in content creation, so he gave a 5% stake in the company to Phani in exchange for Phani's support. This is an example of an equity carve-out, where owners partially divest interest and sell a minority stake to an outsider. A recent example is ICICI Bank reducing its stake in ICICI Lombard General Insurance while it was merging with Bharti Axa.

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    11 views2 pages

    Daily Dose v2.0

    Uploaded by

    Ratan
    Suresh started an education venture for underprivileged children after retiring from a corporate career and getting an MBA. The venture gained traction and secured $500 million in funding. Suresh realized he needed an expert in content creation, so he gave a 5% stake in the company to Phani in exchange for Phani's support. This is an example of an equity carve-out, where owners partially divest interest and sell a minority stake to an outsider. A recent example is ICICI Bank reducing its stake in ICICI Lombard General Insurance while it was merging with Bharti Axa.

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    © All Rights Reserved
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    of 2

    *Daily Dose*

    *1st June, 2022*

    *Equity Carve-out*

    Suresh had always been interested in giving back to the society. After establishing himself in the
    corporate world and holding the Chief Executive posts and Board positions in various listed entities
    he took an early retirement and pursued management from ISB, Hyderabad. After passing out, he
    was determined to do something for the society and opened a company to start an education
    venture for the underprivileged children. The idea gained traction and he secured a funding of $500
    million from a US based philanthropist.

    Everything was going good till Suresh realized that the size of the Company is growing large and he
    would need support from someone who is an expert in content creation to reach the masses. Suresh
    got in touch with Phani who was a master in content creation and engagement enhancement
    functions. Phani was ready to come on board but with a stake of 5% in the Company.

    Suresh was so determined and committed to the cause that he let Phani take a stake in the
    company.

    The above is an example of Equity Carve out. This is basically, a process wherein owners partially
    divest an interest in a business and sell off a minority stake to an outsider.

    A recent example of such a demerger is reduction in stake of ICICI Bank Limited in ICICI Lombard
    General Insurance Company Limited while the later was merging with Bharti Axa for larger value
    creation.

    *Finance Club*
    *PGPPro 2022*

    *Daily Dose*
    *2nd June, 2022*

    *Disinvestment*

    Continuing with our discussion on types of De-merger, let us discuss Disinvestment.

    When the government wants to sell its stake in some public sector undertakings (PSU), it is called
    disinvestment. Through disinvestment, the government does not intend to reduce its control or
    management of the PSU. The intention rather is raising money usually to fill the chronic long term
    running fiscal deficit. The other reason might be that the government wants to encash the value and
    eventually privatize the entity.

    A recent example is disinvestment of the government’s stake in Life Insurance Corporation of India.

    *Finance Club*
    *PGPPro 2022, Hyd*

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