BUSINESS RE-STRUCTURING

- CA HARESH
SHAH
INTERNAL RE-STRUCTURING
Means:

Examine the present structure of the

group businesses

Legal- Company, WoS, LLP

Financial:- leveraging, flexibility

of financing, expansion, Promotor
group shareholding and Family
Succession

Tax optimization including

transfer pricing regulations

2
INTERNAL RE-STRUCTURING

Future plan:- IPO, JV, alliance

and exit

Commercial:- Synergies,
focused management , risk and
return profile, cost optimization
and unlocking value

Return to shareholders:-
Dividend and Buy Back

3
 OPTIONS AVAILABLE

Merge
r

Re-
Demer
Itemise Structuri ger
d Sale
ng

Slump
Sale

Apart from above, there are various other options available in 4

restructuring.
Case Study:- Godrej Group

5
ABOUT GODREJ GROUP
Recently, Godrej Group consolidated Godrej Industries Limiteds (GIL) interest in
Godrej Vikhroli Properties LLP (GVP LLP) (a joint venture entity of Godrej Properties
Limited and Godrej Industries Limited) with the Godrej Properties Limited (GPL).

GIL GPL
India's leading manufacturer of Real estate development arm
oleo chemicals and makes of the Godrej Group.
more than a hundred chemicals It is a subsidiary of Godrej
for use in over two dozen Industries Limited.
industries.
Godrej Vikhroli Properties LLP is incorporated in 2011, a limited liability
partnership between GPL and GIL to develop an integrated township project known as
The Trees consisting of residential and commercial developments, planned over
approximately 34 acres of land in Vikhroli to be build in 3 phases. GPL has 60% share
in the LLP while GILs share is 40%.

6
EXISTING STRUCTURE

GIL

40% Why Restructuring:-

56.41%
GVP LLP Godrej Industries Limited wants to
exit from the project The Trees
60%

GPL
THE RE-STRUCTURING

The restructuring steps as

follows: SPV
Step I
100%
Step 1:- GIL to formed a Special GIL GVREL*
Purpose Vehicle (SPV) GIL Vikhroli
Real Estate Limited (GVREL) as a Step
wholly owned subsidiary of GIL. 56.41% III 40
% Step

Step 2:- GVREL will enter as partner II

60%
in GVP-LLP with 40% share and GPL GVP LLP
simultaneously GIL will retire itself
from GVL-LLP.

Step 3:- GVREL will get merged with

GPL.

*:- New company incorporated..

WHY SUCH STRUCTURE
GIL formed Special Purpose Vehicle (SPV) GIL Vikhroli Real Estate Limited and then
this to be merged in GPL. There can be 2 main reasons for doing so:-

To make Transaction
Tax neutral for GIL as shareholder of GPL

Cash neutral for GPL

9
GAIN TO GODREJ GROUP

Exit for GIL from non-core business.

Remaining two phases profit will be booked by GPL alone.

Promoters holding in GPL will increase to 76.86% from current level of

74.91%.

GIL/Promoters are likely to get about INR 145 crore from selling their
1.86% stake tax free .

10
Case Study:- Adani Group

11
ABOUT ADANI GROUP
Diversified industrial conglomerate Adani Group restructured its business in which the public
listed power generation and ports firm spliced out of the flagship company Adani Enterprises
Ltd (AEL) while the privately held power transmission unit be listed as a separate firm.
AEL decides to restructure four major businesses

PORT BUSINESS: Operated through Adani Ports and Special Economic Zone Limited
(APSEZL), in which AEL was holding 74.99% stake.

POWER BUSINESS: Operated through Adani Power Limited (APL), in which AEL was holding
68.99% stake.

TRANSMISSION BUSINESS: Adani Transmission Limited (ATL), WoS, through which the
group is operating its Transmission business.

COAL BUSINESS: Adani Mining Private Limited (AMPL), a wholly owned subsidiary of AEL to
undertake activities relating to development and operation of domestic coal mine.

12
 PRE RE-STRUCTURING STRUCTURE OF ADANI GROUP
ADANI
ENTERPRISE
S LIMITED

Mining &
Oil & Gas Agro Product Port Power
Trading
100% 100% 100% 100% 74.99% 68.99% 100
Adani Ports %
Adani Mining Adani Adani
Adani Global Adani Gas Special Adani Power
Private Agrifresh Transmission
Limited Limited Economic Limited
Limited Limited Limited
Zone Limited
100 65% 50 100%
% % Adani Power
Adani Global Adani Welspun Adani Wilmar
Maharashtra
FZE, Dubai Exploration Limited
Limited
100 90.91 9.09
% % %
Adani
Adani Global
Transmission
Pte, Singapore
India Limited

Before Re-Structuring, equity shares of AEL, APSEZL and APL were listed on
THE RE-STRUCTURING
Transaction I
Demerger of the Port Undertaking of AEL comprising the undertaking, businesses, activities,
operations, assets and liabilities pertaining to Belekeri Port and investment of AEL in APSEZL
into APSEZL.

Transaction II
Demerger of the Power Undertaking of AEL comprising the undertaking, businesses, activities,
operations, assets and liabilities pertaining to the 40MW Bitta Solar Project and investment of
AEL in APL into APL.

Transaction III
Demerger of the Transmission Undertaking of AEL comprising the undertaking, businesses,
activities, operations, assets and liabilities relating to the Mundra- Zedra transmission line and
investment of AEL in ATL into ATL. ATL to be listed on BSE Limited and National Stock Exchange
of India Limited pursuant to the scheme.

Transaction IV
Merger of AMPL into AEL.

14
 POST RE-STRUCTURING STRUCTURE OF ADANI GROUP
Adani
Enterprises Adani
Limited (AEL) Transmission
Limited (ATL)

Agro Gas and

Mining Trading Product Adani Ports and
Oil Special Economic
100% 100 100%
Zone Limited
(APSEZL)
%
Adani Adani
Adani Gas
Global Agrifresh
Limited
Limited Limited
50% 65% Adani Power
Adani 100 100% Adani Adani Adani Limited (APL)
Global % Global
Pte, Wilmar Welspun
FZE, Dubai
Singapore Limited Limited
AEL, APSEZL, APL and ATL have their equity shares listed on BSE and NSE.
AEL now is engaged in Mining, Trading, Agro Product and Gas & Oil businesses. Adani Global
Limited, Adani Agrifresh Limited and Adani Gas Limited are subsidiaries of AEL while Adani Global
FZE & Adani Global pte are step down subsidiaries of AEL.
Adani Wilmar Limited & Adani Welspun Limited are the Joint Ventures of AEL.
WHY RE-STRUCTURING
Each of the varied businesses are distinct in terms of

Potential for growth and profitability

Nature of risk and competition
Different level of capital
Direct ownership of operational businesses
Increase the valuations
Shareholders will be having the flexibility to remain invested in one or more of the
businesses

16
VALUE CREATION
Let us try to calculate gain to the shareholder

Particulars Amount
Share price of AEL before demerger 557
announcement i.e on 28.01.2015
Todays Price i.e. on 19.08.2015
AEL 86
APSEZL (368* 1.4123) 520
APL (27*1.8596) 50
ATL 40
Adjusted price of AEL 696
Gain in prices 139
(24.95%
)

17
Case Study:- Aditya Birla Nuvo

18
ABOUT ADITYA BIRLA GROUP
Aditya Birla groups conglomerate Aditya Birla Nuvo Limited (ABNL) announced
consolidation of its branded apparels businesses under its listed subsidiary - Pantaloons
Fashion & Retail Limited (PFRL). Acquired in 2012 from Future group

Presently, the apparels retail businesses of the Aditya Birla group are housed under three
separate entities i.e. ABNL, Madura Garments Lifestyle Retail Company Limited
(MGLRCL) and PFRL. ABNL has two division Madura Fashion & Lifestyle and Jaya shree
textile.

PFRL is among the top 3 large format fashion retailers and the largest branded
womenswear retailer.

MGLRCL, WoS of ABNL, is the largest premium branded apparel player in India. Its
premium brands Louis Philippe, Van Heusen, Allen Solly and its popular brand - Peter
England, are leaders in their respective categories.

19
PRE RE-STRUCTURING STRUCTURE
Aditya
Public
Birla
Group 58.30 ABNL 41.70
% %

Financial Telecom Fashion & Manufacturing

Services
Lifestyle
Life Agri
Insurance 100
MGLRCL
Brande %
Asset d Rayon
Management 72.62
Appare PFRL
ls %
NBFC Insulators

20
Broking
THE TRANSACTION
a ABN 100% MGLR
CL
L Divisio
Madur Divisio
ns a Madur
ns
Demerger of two
Fashio a
divisions
n& Lifest
Lifesty yle
le
Jaya Textil
Shree e

72.62 PFRL
%

21
THE TRANSACTION
Transaction Steps:-
Aditya
ABNL Birla Public
Step I:- Demerger of Madura Fashion (division of
Group
ABNL) into PFRL.
9.06 51.10 39.84
% % %
Step II:- Demerger of Madura Lifestyle (division of Pantaloons/AB
MGLRCL) into PFRL. FRL
=
Madura F&L
As result of re-structuring, PFRL will issue shares to Pantaloons
the shareholders of ABNL. The existing base of 92.8mn Madura
Shares of PFRL will expand to more than 770 mn. Lifestyle
Post Re-structuring ABNL stake will come down to 9.06%
from 72.62% resulting into losing of control over PFRL.

22
WHY RE-STRUCTURING
Consolidation of lifestyle business under one roof
Synergies of operation and cost savings in terms of size
Entire spectrum of fashion
Madura will get exposure to women wear
Promoter group holding in PFRL.

23
VALUE CREATION
Let us try to calculate gain to the shareholder

Particulars Amount
Share price of Aditya Birla Nuvo before 1570
demerger announcement i.e on 30.04.2015
Share price of Pantaloons before demerger 114
announcement i.e on 30.04.2015
Todays Price
Aditya Birla Nuvo (52 week high) 2335*
Pantaloons 222

24
 THANK YOU
About the Author :
He is a Chartered Accountant with over three decades of experience in Tax
Consultancy and Audit Advisory. He has over 2 decades of experience in Corporate
Restructuring with expertise in Business Strategy and Corporate Taxation. He is also
an alumni of Harvard Business School.

To Know more visit www.hareshshah.com

Connect with
Us :

Disclaimer:- All the respective companies logo have been taken from google. Share prices
are taken from bse.

2015 hu consultancy. All rights re