Professional Documents
Culture Documents
Disinvestment in India
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
Minerals specified in schedule to atomic Energy (Control of Production and Use) Order, 1953
Railway Transport
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 undertaking Due diligence, etc. by short-listed bidders
Privatization Process
Finalization of shareholders agreement
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
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
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
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
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.
Cost Control: As per NCAER Study Report the cost structure in PSEs is increasing as compared to private sector, which is able to contain costs on all parameters.
23.3 6.5
11.7 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 Pricing Target investor set Transaction costs Time involved Regulation Explanation Optimisation / maximisation through competitive tension and control premium Investors with strategic fit - technocommercial credentials Low 6-10 months Companies Act, SEBI Take-over code, Stock Exchange, RBI regulations, FIPB clearance (for foreign investors) Non-strategic Companies Companies where Government is willing to give significant management control
MFIL, BALCO, CMC, HTL, VSNL, IBP, HZL, PPL, IPCL, etc
Suitability
Precedents
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 prequalified 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
Particulars Offer for Sale to Public at Fixed Price Offer For Sale To Public Through Book Secondary Market Building Operation Optimized, since price is discovered through a bidding process At market prices Essentially wholesale could be retail investor also Low, in terms of brokerage Spot transactions
Pricing
Decided before the transaction, at a discount to market Mix of retail and wholesale, with some Essentially wholesale reservation for small but small investor also investors High, in the range of High, in the range of 2-5% depending on 2-5% depending on issue size issue size 3 - 4 months 3 - 4 months
Regulation
SEBI guidelines, Stock SEBI guidelines, Stock Exchange Exchange Stock Exchange requirements requirements requirements
Capital Market
Particulars International Offering Private Placement of Equity Auction Valuation by merchant banker and feedback from institutional investors or price optimised discovered through book building through bidding Essentially institutional including multilateral agencies, private equity Essentially funds institutional Low 1-2 months Low 1-2 months
Pricing
Valuation by QIBs
Regulation
FII (Retail investor also for ADR) High, in the range of 2-5% depending on issue size 3-5 months Disclosure requirements by Securities Exchange Commission (SEC) and accounting in accordance with US Generally Accepted Accounting Practices (GAAP) (for ADRs), NASDAQ / NYSE/ LSE listing requirements
Foreign investment guidelines in case of overseas investors, SEBI Take-over SEBI guidelines in case of code domestic listed companies
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 Members (may or may not be) Offer made through an Offer Document
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% Regulatory compliances SEBI Regulations & Stock Exchange
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 At trading market prices
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 Method may not be considered transparent
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 cutoff price (Dutch Auction) or at bid price (French Auction) The issue is usually fully underwritten Offer through an offering document
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 trigger of Take-over code (or as per SEBI guidelines)
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 Pricing Explanation Market determined price, after building in returns to the warehouses. Profit on sale, net of selling expenses by warehouses shared in predetermined ratio Essentially institutional Fixed return to warehouses less cost of funds for GoI
Target investor set Transaction costs Time involved Regulation Suitability Precedents
within 1 month
RBI restrictions on bank investments Listed companies with adequate liquidity Potential for growth in market prices None
Reduction In Equity
Particulars Pricing Buy Back of Shares SEBI Buyback regulations Shares bought back by the Target Investor Set company Transaction Cost Time Involved Regulation Low Within three months Companies Act, SEBI Buyback regulations
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 None in Public sector, Indian Rayon, Reliance Industries Limited in private sector
Conversion of Equity Into Another Instrument Book value / market price based Wholesale Low- Placement Cost Up to 3 months Companies Act
Suitability Precedents
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 Reduces cash surplus with the company
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 Placement of the instrument
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
1. Discounted cash flow 2. Relative valuation' approach 3. Net asset value' approach
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 discount rate.
Profit and loss account of Company X for the first year of business projections
Particulars Revenue Sales receipts Expenses Consumption of material Other overheads Total expenses PBDIT 300 50 350 150 500 Rs million
Computation Of FCF
Year 1 FCF computation for Company X Rs million Year 2 Rs million Year 3 Rs million Year 4 Rs million Year 5 Rs million
PBDIT of Company X 150 Less: Income tax (assumed) Less: Capital expenditure (assumed)
* Less: Incremental working capital (assumed)
-20 -50
-25
-50
-75
-100
-125
FCF
55
60
115
170
225
9.00%
Cost of Equity
22.50%
Cost of Debt Estimated Corporate Tax Rate 35.70% Current corporate tax rate in India Cost of debt provided by the Management Pre-Tax Cost of Debt*(1-Tax Rate) Average debt equity ratio of Company X for past five years
Comps Pre-Tax Cost of 16.50% Debt Comps After-Tax Cost of Debt Target Debt equity ratio 10.61% 1.00
WACC
16.55%
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:
Year 1
Year 2
Year 3
Year 4
Year 5
Rs million 60
Rs million 115
Rs million 170
Rs million 225
0.858
0.736 44
0.632 73
0.542 92
0.465 105
Where; Discount Factor = Weighted Average Cost of Capital, and; g = Estimate of average long term growth
Valuation of Company X based on DCF methodology Primary value Terminal value Enterprise value Add: Value of (assumed)@ surplus land outside factory area
200 -600
Business is being transferred / acquired Business possesses substantial intangibles Business is not being valued for the substantial undisclosed assets
1. The value of intangibles is not significant 2. The business has been recently set up
1. 2.
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 extraordinary 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 of Company X Part A: Immoveable assets (valued by Government approved valuer) Value of buildings in factory area Value of buildings at staff colony Value of surplus land outside factory area Part B: Moveable assets (valued by Government approved valuer) All moveable assets Add: Other assets as per latest balance sheet Value of current assets as per last audited accounts Cash balance as per last audited accounts Less: Liabilities Estimated Voluntary employees retirement scheme cost for all
Rs million
100 50 200
Total outstanding borrowings including bank loans, government loans, current liabilities (trade creditors, non trade creditors and statutory liabilities) Equity value
-900 250
Case Studies
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
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.
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.
Orissa Experience
Govt Distanced itself as Govt has shown good commitment to the soon as the privatization success of the Reform Processtook place yClear cut policy directions for 5 years yCommitted support- about Rs 2600 Crs yAntitheft legislation to be enacted yBase line data mismatch yDifficulty in segregating losses Concept of AT &C losses to yReduce scope for baseline data errors yProvide more realistic loss levels yProvide greater comfort & since approved by commission yLimited to last months receivables yPast receivables to the account of Holding Company- No obligation to collect ( 20% incentive on amount collected) yLevel of Receivables in line with the Avg monthly billing of the last 6 months yFull involvement from the beginning yIndicated amenability to the reforms process yPolicy Directives accepted in BST order yRecognition of Discom in BST order
Loss Levels
Receivables
yUnrealistically high
Regulatory Involvement
Asset Valuation
yAssets revalued at higher yAssets valued through Business value prior to bidding Valuation based on revenue earning process potential
2. All the liabilities of DVB are transferred to Holding Company, entire Equity of Holding Company is issued to GoNCTD
GoNCTD
Holding Company
4. Equity and Debt in the successor entities, equal to the value of Serviceable liabilities is issued in favor of the Holding Company.
GENCO
Indraprastha Power Generation Company Ltd.
TRANSCO
Delhi Power Supply Company
DISCOM-I
Central-East Delhi Electricity Distribution Company Ltd.
DISCOM-II
South-West Delhi Electricity Distribution Company Ltd
DISCOM-III
North North West Delhi Electricity Distribution Company Ltd
9
10 Jan 2003
55 = 45 units or 45%
12
The Evaluation Committee also consisted of ABN Amro as the Financial Consultant and Air Plan as the Global Technical Advisor
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
JVC
26% AAI
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 nonaeronautical activities that the JVC should undertake, and a list of reserved activities (being governmental sovereign functions like customs, immigration etc) that the JVC may not undertake. Stand alone commercial activities also were not permitted.
Non-aeronautical activities restricted to 5% of the total land in Delhi and 10% of total land in Mumbai
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 subject to a review process rather than an approval process.
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 requirement at airports etc.
List of Bidders
Bidders for the Delhi Airport Reliance-ASA GMR-Fraport DS Construction-Munich Sterlite-Macquarie-ADP Essel-TAV Bidders for the Mumbai Airport Reliance-ASA GMR-Fraport DS Construction-Munich Sterlite-Macquarie-ADP Essel-TAV GVK-ACSA
Ownership Restrictions
Cross-Ownership Airline Participation Foreign Ownership Lock-in
Bid Structure
Any bidder not meeting the mandatory requirement will have its offer removed from further consideration Debt and equity commitment is evaluated and offers not meeting the requirement are excluded from further consideration All remaining offers are assessed on technical pre-qualification criteria and only those assessed with technical pre-qualification on each of the two criteria of 80% or more proceed to phase 4
The offer of the bidder with the highest financial consideration for the airport is selected as the successful bidder
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
Master Planning Experience (7.4) Major Airport Development Experience (15) Development Commitment Master Planning (7.4) Major Airport Development (7.4) Indian Infrastructure Development (7.4)
Management Commitment Commitment of Airport Operator (12.5) Commitment of other Prime Members (12.5) Management Value Add HR Approach (12.5) Transition Plan (12.5) Stakeholder Management (6.25) Environmental Management (6.25)
Evaluation Criteria
Development Value Add Long Term Vision (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)
Delhi Airport Reliance-ASA GMR-Fraport DS Construction-Munich Sterlite-Macquarie-ADP Essel-TAV Mumbai Airport Reliance-ASA GMR-Fraport DS Construction-Munich Sterlite-Macquarie-ADP Essel-TAV GVK-ACSA
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 Report which included conflict of interest and rating issues
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.
Bidder
Management Capability, Commitment and Value Add Old New 80.2 84.9 72.7 57.0 39.2 80.9 84.7 73.1 57 37.6
Development Capability, Commitment and Value Add Old New 81 80.1 69.9 61.9 40.3 81 80.1 70.5 61.9 41.4
Delhi Airport Reliance-ASA GMR-Fraport DS Construction-Munich Sterlite-Macquarie-ADP Essel-TAV Mumbai Airport Reliance-ASA GMR-Fraport DS Construction-Munich Sterlite-Macquarie-ADP Essel-TAV GVK-ACSA
Bidder
Management Capability, Commitment and Value Add Pre GETE Post GETE 80.9 84.7 73.1 57 37.6 74.8 81.7 73.3 53.5 40.4
21.33 33.03 28.12 Bid not opened Bid not opened 38.7
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
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 problems at MFIL were under- utilization of the production facilities, large work force, low productivity and limited flexibility in decision-making
PRIOR TO SALE 1 Authorised share capital . Paid up capital Losses 1998-99 Losses 1999-00 **(Inclusive of an amount of Rs. 35.19 cr. towards provisions made for previous years.) Number of employees 2 Net Worth (and total expected . realisation) as per DPE Survey 1998-99 Value of assets as per 31.3.99 accounts: Gross Net Market value of land & building as per Government valuer 3 Valuation of 100% equity by . different methods - as done by global advisors
AFTER SALE 1. 74% of the shares sold for Rs. 15.00 cr. Rs. 13.01 cr. Rs. 105.45 cr. and further Rs. 6.87 cr Rs. 20 cr. Invested by HLL in the company. Rs. 48.23 cr **
2042 2. Thus, the Government gained by selling Rs. 1000 shares for Rs. 11,490, i.e.more than 11 times the face value & 3.68 times the Book Value.
Rs. 38.76 cr. Rs. 18.99 cr. Rs. 109.00 cr. Rs. 30 cr. to Rs. 70 cr.
3. HLL's share value went up from Rs. 2138 on 30th 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.
Thank You