1. Corporate restructuring October 2013

2. Role of CFO Page 2 Recent trends in M&A Reorganization prerequisites Fund raising/cash infusion in operations Unlocking business value Tax planning Restructuring options in light of recent tax & regulatory developments Content

3. Role of CFO Page 3 Glossary CGCentral Government DDTDividend Distribution Tax IPRIntellectual property right ITAIncome-tax Act, 1961 LLPLimited Liability Partnership MATMinimum Alternate Tax M&AMergers and Acquisitions NCLTNational Company Law Tribunal OLOfficial Liquidator ROCRegistrar of Companies SCRASecurities Contract (Regulation) Act, 1956 SEBISecurities and Exchange Board of India WOSWholly owned subsidiary CBDTCentral Board of Direct Taxes

4. Role of CFO Page 4 Recent trends in M&A

5. Role of CFO Page 5 Recent trends - M&A deals in India Source: Thomson ONE; Ernst & Young research Note: data does not includes PE deals

6. Role of CFO Page 6 Recent trends - M&A deals in India Cross border vs. domestic activity Source: Thomson ONE; Ernst & Young research Note: data does not includes PE deals Cross-border deals represented nearly 60% of the aggregate deal value in 2012. Outbound deal activity fell in 2011 as capital raising was affected due to high borrowing costs and devaluation of the rupee. Cross-border deals represented nearly 60% of the aggregate deal value in 2012. Outbound deal activity fell in 2011 as capital raising was affected due to high borrowing costs and devaluation of the rupee.

7. Role of CFO Page 7 Restructuring Rationale Commercial Financial Business synergies Inorganic growth Gain more competitive position Focus on core competencies Achieve economies of scale Stake enhancement Greater control over assets and operations Exit Strategic alliances/ partnerships Unlocking value Tax savings Reducing administrative and management costs Upstreaming cash Encashing value Cash infusion in operations Projecting stronger financials Organic growth Larger dividends to promoters Role of CFO integral in identifying opportunities/business requirements Reorganization prerequisites: a snapshot

8. Role of CFO Page 8 Fund raising/cash infusion in operations

9. Role of CFO Page 9 Modes of restructuring for fund raising Fund raising Split Consolidation Vertical, horizontal and hybrid split – suitable for value split, when funds are required in specified business Consolidation of similar business via merger, demerger and slump sale

10. Role of CFO Page 10 Classical/vertical split Company A to transfer Business Y to NewCo Existing shareholders to be the shareholders of NewCo Transfer could be effected by way of slump sale, demerger or gift of Business Y to NewCo NewCo to raise funds for Business Y Results in value split between multiple companies Appropriate in case of unlisted companies wherein funds are required only in a specific business Co A Shareholders NewCo Business Y Business X Transfer Business Y Investor Funds Value split between multiple companies

11. Role of CFO Page 11 Downward/horizontal split Company A to transfer Business Y to its WOS Transfer to be effected by way of slump sale, demerger or gift of Business Y to WOS WOS to raise funds for Business Y Value captured at Co A level Appropriate in case of listed companies wherein funds are required in only in a specific business Co A Shareholders WOS Business Y Business X Transfer Business Y Investor Funds Value consolidation along with fund raising efficiency

12. Role of CFO Page 12 Hybrid split Company A to transfer Business Y to NewCo Transfer to be effected by way of slump sale, demerger or gift of Business Y to NewCo Such that, Co A and Shareholders hold share in NewCo NewCo to raise funds for Business Y Limited value capture at A Co level Co A Shareholders NewCo Business Y Business X Transfer Business Y Investor Funds Hybrid structure – achieves (limited) consolidation of value and fund raising ability

13. Role of CFO Page 13 Funding options Equity share capital Compulsorily Convertible Debentures Shareholders loans Compulsorily Convertible Preference Shares Redeemable debentures Optionally convertible preference shares Redeemable preference shares Optionally convertible debentures Funding options

14. Role of CFO Page 14 Funding options – Key considerations Ease of repatriation Commercial considerations Extent of control and voting rights Tax efficiency Indian exchange control regulations Indian company law regulations Key considerations

15. Role of CFO Page 15 Unlocking business value

16. Role of CFO Page 16 Unlocking business value - Modes Acquisitions Takeover of a sick entity Consolidation of operations Enhancing promoter holdings Tax savings Eliminate multiple layers of holdings Focus in management, achieve higher market value, etc Segregation of core and non-core businesses Sale of business in a tax efficient manner Making an entity exit ready Unlocking business value Disinvestment of non-core business Consideration may be structured (Cash / shares) Time sensitivity Transfer of single/ identified asset No requirement for the Buyer Co to continue to undertake the business

17. Role of CFO Page 17 Merger Appropriate in cases where similar businesses are carried out in multiple entities Consolidation of 2 or more entities by transfer of all assets / liabilities Consideration – typically Transferee issues shares to shareholders of Transferor Consolidates value in a single entity and enables fund raising on basis of strength of consolidated business High Court driven process – Typically takes 5-6 months Tax neutral under India tax laws, subject to satisfaction of certain conditions Merger Transferor Co (Amalgamating Co) Transferee Co (Amalgamated Co) Shareholders of Transferor Co Consideration in the form of shares of Transferee Co Shareholders of Transferee Co Shareholders of Transferor Co Shareholders of Transferee Co (Merged Entity) Transferor Co Transaction Resultant Structure Dissolved

18. Role of CFO Page 18 Appropriate when requirement is to focus on core business/sell non-core business Involves transfer of identified business from one company to another Consolidation of two or more entities by transfer of all assets / liabilities Consideration – typically Transferee (Resulting Co) issues shares to the shareholders of Transferor (Demerged Co) High Court driven process – Typically takes 5-6 months Tax neutral under the India tax laws, subject to satisfaction of certain conditions Shareholders Resultant Structure Transferor Co (Demerged Co) Transferee Co (Resulting Co) Shareholders of Transferor Co Demerger of Business B Consideration in the form of shares of Transferee Co Transaction Business ABusiness B Transferor Co (Demerged Co) Transferee Co (Resulting Co) Business A Business B Demerger

19. Role of CFO Page 19 Involves transfer of identified business for lump sum consideration from one company to another In consideration, the buyer company can issue shares / pay cash to the seller company No Court interference Freedom of structuring consideration as cash / shares unlike in a demerger Different between sale consideration and net worth of the business taxable as capital gains Transaction Post slump sale scenario Selling company (Company A) Shareholders Consideration as shares/ cash Shareholders Selling company (Company A) Selling Company Buyer company Slump sale of Business B Business A Business B Slump sale

20. Role of CFO Page 20 Involves transfer of business where consideration is identified against each asset In consideration, the buyer company to pay cash to the seller company No Court approval required - can be achieved through shareholder resolution and a business transfer agreement (1 –2 months) Taxable capital gains – to be computed for each capital asset sold Transaction Consideration Selling Company Buyer company Itemized sale of Assets Itemized sale

21. Role of CFO Page 21 Tax planning

22. Role of CFO Page 22 Merger of profit and loss making companies Company A (Co A) and Company B (Co B) part of same group Co A is a profitable company, paying normal corporate tax Co B is a loss making company and possess tax losses Co B to merge with Co A Potentially result in reduction overall group tax cost Taxes in Co A to be set off against losses of Co B Utilization of accumulated losses of Co B could be accelerated Co A Shareholders Co B Merger Losses Accelerated utilization of tax losses within the group vs stamp duty costs

23. Role of CFO Page 23 MAT planning Company A (Co A) and Company B (Co B) part of same group Co A enjoy tax holiday and pays tax under MAT provisions Co B paying normal corporate taxes Co B to merge with Co A Overall group tax cost could be reduced Companies required to pay higher of MAT tax or normal corporate tax Merged entity to take credit of taxes payable on account of MAT for Co A Co A Shareholders Co B Merger 10A unit Reduction in group tax cost. Full realization of tax holiday benefit

24. Role of CFO Page 24 Other features LLP to have minimum 2 individuals (one of them to be Indian resident) as designated partners No cap on number of partners Flexibility in adjusting profit share vis-à-vis capital contribution Rights of a partner to share profits or losses transferable Foreign investment has been allowed in LLP via Government approval LLP - A hybrid entity structure Features of Limited Liability Partnership (LLP) Features common with Company Features common with Partnership firm Body Corporate Distinct Legal Entity Limited Liability Perpetual Succession Common Seal Minimum 2 partners Mutual Agreement Partners personally liable for their own wrongful act or omission

25. Role of CFO Page 25 DDT planning Mechanism Ind Co. belongs to Foreign/Indian owned group Ind Co. converted to LLP Parent Company is partner in LLP LLP distributes profits to partners Key benefits No DDT Profits exempt in hands of partners of LLP Challenges Tax implications upon conversion of existing company into LLP Profit distribution Conversion to LLP Shareholder Partner Transferor Co Ind Co India LLP

26. Role of CFO Page 26 Deemed dividend Mechanism Parent with multiple Indian operating entities Indian operating entities set up as LLPs Excess cash in one operating entity and need for cash in another Inter-LLP loan Key benefits Inter-LLP not considered as deemed dividend Tax efficient movement of cash within operating entities Loan India LLP 2 India LLP 1 India LLP 3 India Co 3 India Co 1 India Co 2 Parent

27. Role of CFO Page 27 Restructuring options in light of recent tax and regulatory developments

28. Role of CFO Page 28 Recent tax and regulatory developments Developments Companies Act 2013 Others Companies Bill introduced in 2008 Passed by the Lok Sabha in Dec 2012 Passed by the Rajya Sabha and Presidential assent in August 2013 SEBI Tax Key recent developments in the Indian tax landscape

29. Role of CFO Page 29 The Companies Act, 2013

30. Role of CFO Page 30 Investment layers Restriction shall not apply to: Acquiring a company incorporated outside India if such subsidiary has investment subsidiaries beyond two layers as per laws of that country; or Subsidiary having investment subsidiaries for meeting statutory requirements H Co (Op Co) Inv Co 1 Inv Co 2 Inv Co 3 Target Co H CO (Op Co) Inv Co 1 Inv Co 2 Inv Co 3 Target Co Companies Act, 2013Companies Act, 1956 Not Notified Impact The new restriction may need to be considered while evaluating any grouprestructuring To evaluate whether existing multi layered structures will be impacted

31. Role of CFO Page 31 Treasury shares Presently on merger of wholly or partially owned subsidiary with its parent, new shares in lieu of shares held by parent itself may be allotted to a trust which will hold such shares for parents benefit Companies Act, 2013 prohibit companies from holding shares in the name of trusts either on its behalf or on behalf of any subsidiaries or associate companies Provision likely to be effective prospectively Impact Negates the dual advantage available earlier to the company to Indirectly hold such shares to provide access to liquidity; and Allowing promoters to retain a controlling stake Not Notified

32. Role of CFO Page 32 Treasury Shares – Case Study… Cos Act, 1956 Cos Act, 2013 A Co Trust X C Co 100% Issue of shares on merger merger Settlement of shares into Trust Flexibilities relating to liquidity and increase in promoter control is available A Co* C Co 100% merger Flexibilities relating to liquidity and increase in promoter control may no more be available * No issue of shares on merger

33. Role of CFO Page 33 Treasury Shares – Case Study – Likely Impact Cos Act, 1956 Cos Act, 2013 Books of A Co ParticularsRs Net Assets of C Co 200 Interest in Trust 300 Books of A Co ParticularsRs Assets of C Co200 Goodwill300 Suppose A Cos cost of investment in C Co is Rs 500 Book net worth of C Co is Rs200 Post merger likely impact in books of merged A Co would be as under; As per AS-14, goodwill on merger to be amortised over 5 years unless longer period can be justified

34. Role of CFO Page 34 Cross border mergers Not Notified Companies Act, 2013 permits outbound mergers i.e. amalgamation of Indian companies with Foreign companies Requirements relating to inter alia notified foreign jurisdiction and compliance with prescribed rules applicable to inbound as well as outbound merger Consideration to shareholders of merging entity could be in form of cash or depository receipts Impact Scope of inbound mergers may get restricted to notified jurisdictions Tax and FEMA regulations to be aligned

35. Role of CFO Page 35 Fast Track merger Not Notified Two Small companies Holding company and WOS Other prescribed class of companies 1 2 3 Additional requirements: Prior notice required to ROC, OL and persons affected by scheme of both companies before shareholders meetings and their objections / suggestions to be placed before shareholders Shareholders and creditors approval (Holding > 90% in number of shares and creditors > 90% in value) Scheme to be filed with CG, ROC and OL who would need to file objections with CG within 30 days In case of no objections, CG to approve the merger Applicability Impact Is auditors certificate on compliance with accounting standards required even if no Courtprocess involved? Does notice need to be given to the tax authorities?

36. Role of CFO Page 36 Merger of Listed Co. in to Unlisted Co. Not Notified Impact Provisions are applicable for both merger as well as demerger Indirect way of minority squeeze-out / delisting? Impact on tax neutrality of amalgamation if more than 25% shareholders opt for exit route? Companies Act, 2013 specifically provides that transferee company shall remain an unlisted company until it becomes a listed company Provision for an exit route for shareholders of the transferor company Payment of value of shares and other benefits in accordance with pre-determined price formula or as per prescribed valuation Payment/ valuation should not be less than what has been specified by SEBI

37. Role of CFO Page 37 Recent updates

38. Role of CFO Page 38 Recent updates - SEBI Circulars & notifications Pre-emption and options in SHA Till recently, SEBI has restricted universally accepted contractual rights like pre-emptive rights, put-call options in Public companies SEBI has now issued a notification permitting contracts in shareholders agreements or articles of companies relating to pre-emption including right of first refusal, tag-along, drag-along rights and put-call arrangements The put-call arrangements are permitted subject to the following conditions: The title and ownership of the underlying securities are held continuously by the selling party to such a contract for a minimum period of one year from the date of entering into the contract The price or consideration payable is in compliance with all the laws for the time being in force The contract has to be settled by way of actual delivery of the underlying securities Contracts need to be in accordance with FEMA regulations The notification applies only prospectively, and does not affect or validate any contract which has been entered into prior to the date of the notification

39. Role of CFO Page 39 Recent updates - Others Listing overseas Unlisted companies that are incorporated in India were not allowed to directly list in overseas markets without prior or simultaneous listing in Indian markets. It has now been decided with the approval of the Union Finance Minister that unlisted companies may be allowed to raise capital abroad without the requirement of prior or subsequent listing in India.

40. Role of CFO Page 40 Questions?

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