India MA Aneja

India MA Aneja - Transcript

India M A Landscape Featuring Vineet Aneja
Partner Fox Mandal Little
GLG Institute Seminar 24th April 2007 Hong Kong



Council Member Biography Vineet Aneja
Vineet Aneja is the head of the corporate practice at Fox Mandal Little one of India s oldest and largest full service legal Organization He specializes in joint ventures mergers and acquisitions project finance corporate corporate consultancy SEBI related laws and foreign exchange laws Mr Aneja s scope of advice includes structuring corporate transactions in a tax efficient manner advice on general corporate issues due diligence and legal audits entry and exit strategies to foreign investors seeking approvals and registrations with various government and other bodies and advice on Foreign Exchange Management Act issues He has advised various Indian and foreign companies on general corporate matters including regulation companies Act etc This includes Gas Authority of India Limited Nuclear Power Corporation of India Limited Alcatel Fidelity Group Colt Telecom ExxonMobil Corporation JP Morgan Fleming Goldman Sachs Alchemy Partners LLP and Ashmore Investments UK

IMPORTANT DISCLAIMER Information provided and material produced in connection with this event is for your own use and may not be redistributed or displayed in any form Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members You agree to keep the material provided by Councils Members for this event and the business information of Gerson Lehrman Group including information about Council Members confidential

Mergers and Acquisitions 2007
Source Assocham Eco Pulse Analysis

Outward FDI flow Expected to be more than USD 15 billion

Destinations for Corporate India China Brazil USA and Africa

Sectors Pharmaceuticals automotives software financial Services real estate hospitality construction services etc

Increasing number of inbound deals 532 deals in 2006


3

Mergers and Acquisitions 2007
Increasing number of outbound deals as compared to inbound investments High value Merger and Acquisition M A deals in commodities especially metals and telecom Growth of M A activity in the commodities sector due to factors such as economic growth international commodity prices exports growth of infrastructure cheap labor etc Rationale for major inbound deals such as Holcim s investment in Gujarat Ambuja and Ambuja Cements mostly to expand capacity in India In January and February 2007 alone 102 M A deals have taken place with a total value of almost USD 36 8 billion

Tata Corus Holcim Gujarat Ambuja Hindalco Novelis





Hutch Vodafo ne





4

Top Deals In Commodities Sector
2006
Acquirer Holcim Essar Group Aban Lloyd Chiles Offshore Mittal Investments Chevron Corporation Target Gujarat Ambuja Cements Limited Essar Oil Limited Sinvest ASA Omimex de Columbia Reliance Petroleum Limited Acquisition Mn USD 470 00 760 81 446 00 425 00 300 00

2007
Acquirer Hindalco Industries Rain Commodities Holcim Mittal Investments Tata Steel Novelis Inc GLC Carbon Canada Inc Ambuja Cement India Limited GSSRL HPCL s Bhatinda Refinery Corus Target Acquisition Mn USD 6 000 00 360 89 117 00 711 11 13 650 00 Source Dealtracker Grant Thornton 2007

5

Vodafone Hutch
Deal size and stake Deal Fourth largest deal of the year 2007 to date at 13 3 bn 11 1 bn plus 2 bn debt Hutchison Essar valued at 18 8 bn Vodafone acquisition is subject to a number of approvals including from the Department of Telecommunications and the Government FIPB Vodafone filed for an approval from the FIPB Application still not been approved due to issues relating to the total direct and indirect foreign holding in Hutchison Essar Press Note 5 of 2005 provides that direct and indirect foreign shareholding in a telecom company cannot exceed 74 The Department of Telecommunication has given its nod All licensing conditions to be met by Vodafone

Regulatory Approvals

Foreign Investment Promotion Board

Foreign Direct Foreign Investment Policy

Department of Telecom

Sector wise Break Up PE deals by value
Jan 2007

Feb 2007

Source Dealtracker Grant Thornton 2007Jan 2007

Regulation of Mergers in India
Mergers are primarily governed by the Company Court and the Ministry of Mergers are primarily governed by the Company Court and the Ministry of Mergers Company Affairs Company Affairs 108A 108I Restrictions on transfer acquisition of shares where acquirer s shareholding Companies results in a dominant undertaking DU Act 1956 in case of existing DU increase substantially the production supply
of goods and services Central Government approval required if in excess of threshold prescribed

390 394 Companies Section 390 to 394 of the Companies Act Governs schemes of Act 1956 Arrangement between companies and their respective shareholders and
creditors under supervision of the Company Court

Merger or Amalgamation under a scheme of arrangement
Most convenient and common method of obtaining a complete merger or amalgamation between companies Active involvement of Court Court sanction under Section 394 2 required Court order to be filed with the Registrar of Companies
Section 390 396A of the Companies Act 1956 1956

Various approvals required in respect of scheme of amalgamation Approval of the Board of Directors Approval of Stock Exchanges Approval of Shareholders Creditors secured and unsecured Approval of Land Holders and under other contracts Approval of the High Court Approval of the Reserve Bank of India

9

Acquisitions
Acquisition of shares in an Indian company by Non Residents governed by the Foreign Exchange Management Transfer or issue of Security by a Person Resident outside India Regulations 2000

No approval required for purchase of shares including existing shares from Residents to Non Residents or vice versa subject to pricing and reporting requirements Press Note 1 of 2005 read with Press Note 3 of 2005 to be complied with in case of existing joint ventures Proposals in the Information Technology sector investments by multinational financial institutions and in the mining sector for same area mineral exempted

Acquisition of shares in an Indian listed company have to be in compliance with the provisions under the Substantial Acquisition of Shares and Takeovers Regulations 1997 Takeover Code

10

Acquisitions Issues under FEMA
Circular No 16
Ge n e ra l p e rm is s io n in re s p e c t o f t ra n s fe rs f ro m R t o N R N R t o R Co n d it io n s u n d e r Circ u la r 1 6 t o b e m e t r e p o rt in g re q u ire m e n t s t o b e c o m p lie d w it h Under the current FDI policy most sectors under the automatic route for investment up to 100 including manufacturing and services sector Ap p ro v a l re q u ire d fo r p ro p o s a ls o u t s id e s e c t o ra l p o lic y Prior approval from the Government required for manufacture of cigars cigarettes of tobacco electronic aerospace defense equipments items reserved for small scale sector and FDI in Single Brand retail

Sectoral Caps

FIPB Approval

11

Acquisitions Issues under the Takeover Code
Open Offer Disclosures

Making of an open offer on holding crossing15 Reg 10 Open offer on holding crossing 5 in a financial year for 15 holding to 55 holding Any shares beyond 55 less than 75 Open offer on change of control regardless of acquisition of shares

Upon acquisition of 5 or more

Disclosure at 5 or 10 or 14 or 54 or 74 shares or voting rights Purchase and sale of every 2 for 15 holding to 55 holding Yearly disclosures by persons holding more than 15 by persons in control promoters

12

Joint Ventures
Gaining effective control of Joint Venture Companies

Shareholding 51 49 Joint Venture

Differential Voting Rights Casting Vote Control

Reserved Matters Right to appoint Top Management

Nominees on Board

13

Key Shareholding Thresholds

26 Special Resolutions can be blocked

51 Ordinary Resolutions can be passed

75 Approval of at least 75 shareholders present and voting required to pass a Special Resolution

14

Exit Mechanisms Exit
Repatriation of profits from made by Indian companies to Repatriation of profits from made by Indian companies to fforeigninvestors as dividends is freely permitted oreign investors as dividends is freely permitted

Exit route in the form of a transfer of the shares of the Exit route in the form of a transfer of the shares of the company company

IIndian ndian

Exit route in the form of a transfer of the assets of the Exit route in the form of a transfer of the assets of the company company

IIndian ndian

Gains derived from transfer of shares in Indian companies Gains derived from transfer of shares in Indian companies are subject to tax in India subject to tax treaties if any are subject to tax in India subject to tax treaties if any

15

Taxation Taxation
Please note the below rates have been proposed in the recent finance bill

Effective rate of corporate tax for nonresident companies and their branches is 42 23 Effective rate of corporate tax for domestic companies is 33 99 Dividend distribution tax of 16 995 is payable by the company Capital Gains tax payable on long term and short term gains varying rates depending upon whether listed or unlisted company Service tax of 12 12 36 including the education cess applies to many services

16

Taxation
Government of India under Section 90 of the Income Tax Act has entered into double tax avoidance agreements with other countries Tax Treaties provide protection to taxpayers against double taxation and prevent discouragement which the double taxation may otherwise promote in the free flow of international trade international investment and international transfer of technology India has entered into DTAA with 65 countries including USA In case of countries with which India has DTAAs the tax rates are determined by such agreements Credit on foreign tax paid domestic corporations is granted

Double Tax Double Avoidance Agreements

Tax havens include Mauritius Singapore Caymon Islands Netherlands etc Tax havens include Mauritius Singapore Caymon Islands Netherlands etc

17



IMPORTANT GLG INSTITUTE DISCLAIMER By making contact with this these Council Members and participating in this event you specifically acknowledge understand and agree that you must not seek out material non public or confidential information from Council Members You understand and agree that the information and material provided by Council Members is provided for your own insight and educational purposes and may not be redistributed or displayed in any form without the prior written consent of Gerson Lehrman Group You agree to keep the material provided by Council Members for this event and the business information of Gerson Lehrman Group including information about Council Members confidential until such information becomes known to the public generally and except to the extent that disclosure may be required by law regulation or legal process You must respect any agreements they may have and understand the Council Members may be constrained by obligations or agreements in their ability to consult on certain topics and answer certain questions Please note that Council Members do not provide investment advice nor do they provide professional opinions Council Members who are lawyers do not provide legal advice and no attorney client relationship is established from their participation in this project You acknowledge and agree that Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members You understand and agree that you will not hold Council Members or Gerson Lehrman Group liable for the accuracy or completeness of the information provided to you by the Council Members You acknowledge and agree that Gerson Lehrman Group shall have no liability whatsoever arising from your attendance at the event or the actions or omissions of Council Members including but not limited to claims by third parties relating to the actions or omissions of Council Members and you agree to release Gerson Lehrman Group from any and all claims for lost profits and liabilities that result from your participation in this event or the information provided by Council Members regardless of whether or not such liability arises is based in tort contract strict liability or otherwise You acknowledge and agree that Gerson Lehrman Group shall not be liable for any incidental consequential punitive or special damages or any other indirect damages even if advised of the possibility of such damages arising from your attendance at the event or use of the information provided at this event



GLG Institute GLGi is a new product that delivers specialized professional education from proven industry thought leaders and academic authorities throughout the world GLGi holds hundreds of professional Education Seminars on any topic in all major markets around the world How is GLGi Different


GLGi clients are guaranteed two seats at every Education Seminars across ALL GLG Practice Areas in ALL geographic regions Propose Seminar topics and locations through the GLGi website Contribute to a Seminar s agenda by suggesting talking points or relevant questions Send Seminars of interest to friends or colleagues





Gerson Lehrman Group Contacts
Kathryn Harrison Legal Economic Regulatory Affairs Gerson Lehrman Group Suite 1002 10th Floor Henley Building 5 Queen s Road Central Hong Kong 852 2912 0702 kharrison glgroup com Andrew Gordon Director Gerson Lehrman Group 850 Third Avenue 9th Floor New York NY 10022 212 984 3693 agordon glgroup com