s subramanian

Strictly Private & Confidential

Restructuring for Value EnhancementNovember 2008

Presented By:

S. Subramanian Ph.D.Head of Investment Banking,

ENAM Securities Pvt. Ltd.

Strictly Private & Confidential 2

Agenda

ENAM

About Restructuring

Case Study - Value Creation through listing

Nicholas Piramal India Ltd

Reliance Industries Ltd

TV 18 India Limited

Case Study – Control & Ownership

Sterlite

Bharat Forge

Other Cases


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Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


Introduction

Corporate restructuring encompasses two distinct groups of activities;

Business Restructuring: Expansions – including mergers and consolidations, tender offers, joint ventures, and

acquisitions; Contraction – including sell offs, spin offs, equity carve outs, abandonment of assets, and

liquidation.

Financial Restructuring: Value Re-engineering - Subsidiarisation, De-subsidiarisation. Ownership and control – including the market for corporate control, stock repurchases

program, exchange offers and going private;


Does Restructuring create value?

The key principle behind corporate restructuring is to create shareholder value over and above that of the sum of the parts.

Corporate Restructuring creates value only if:

Value of the combined entity as a result of the corporate restructuring is greater than the sum of value of individual companies.

C > A + B Value creation

C<= A + B Value destruction


Value Creation through listing of distinct businesses

Objective To list the shares of subsidiary company through allotment of shares of subsidiary company to the shareholders of parent

company pursuant to a scheme of arrangement.

Stake held

Issue of consideration

X Co. (Parent)

Shareholders

Y Co. (Subsidiary)

100%

Listed

Unlisted

X Co. (Parent)

Shareholders

Y Co. (Subsidiary)

Listed

Listed

Distribution of shares of Y Co.

to the shareholders of X Co. pursuant to a scheme of arrangement

Single Business Entity

X Co. (Parent)

Shareholders

100%

Listed

X Co. (Parent)

Shareholders

Listed

Distribution of shares of A, B, & C Co. to the shareholders of X Co. pursuant to a scheme of arrangement

Multiple Business Entity

A Co. (Subsidiary)Tea business

Unlisted

B Co. (Subsidiary)

Steel Business

C Co. (Subsidiary)

Telecom Business

Unlisted Unlisted

A Co. (Subsidiary)Tea business

Listed

B Co. (Subsidiary)

Steel Business

C Co. (Subsidiary)

Telecom Business

Listed Listed

100% 100%


Alternative Routes

Formation of a special purpose company (SPV) – A 100% subsidiary of parent company Transfer investments (shares of Y Co.) from parent company to SPV pursuant to a scheme of arrangement and get shares of SPV

listed Alternative 1A - Merge SPV into Y Co. at a later point in time and get Y Co. shares listed or Alternative 1B – Merge Y Co. into the

SPV at a later point in time, to be decided depending on tax and cost efficiency. Alternative 2 –Let only SPV remain listed without any merger. Alternative1 is preferred purely from an administrative convenience rather than from a shareholder value perspective.

Formation of SPV Transfer of Investments to SPV*

Parent Co

SPV

Shareholders

Listed

Listed

Y Co

Issue of Shares in Consideration

Transfer of investment

Parent Co

SPV

Shareholders

Listed

Alternative 1A

Y Co

Listed

Parent Co

SPV

Shareholders

Listed

Alternative 1B

Y Co

Listed

Unlisted


Parent Co

SPV

Shareholders

Listed

Unlisted

Y Co

Unlisted

- Merge SPV into Y Co, and get Y Co. shares listed

- As consideration Y Co issues shares to shareholders of SPV i.e. Parent Co and its shareholders

- Merge Y Co, into SPV

- Investment of SPV in Y Co will get cancelled. No further shares will be issued

100%100%

*Structure under Alternative 2 shall be similar

SPV to merge into Y Co.

Y Co. to merge into SPV

Alternative 1


Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


Case Study - Nicholas Piramal India Ltd

NPIL

GGPL

Scheme of Arrangement between Nicholas Piramal India Ltd. (NPIL) and Kojam Fininvest Ltd. (KFL) for transfer of 53.76% stake of Gujarat Glass Private Ltd. (GGPL) held by NPIL to KFL

Appointed Date – 01st July 2003, Effective Date – 22nd December 2003

Shareholders

53.76%

Listed

Unlisted

Prior to Scheme of Arrangement

NPIL

GGPL

Shareholders

53.76%

Listed

Unlisted

Prior to the Appointed Date

KFL

Unlisted

100%

KFL was incorporated on 30th June 2003 with a paid up capital of Rs. 5 Lakhs as a wholly owned subsidiary of NPIL

NPIL

GGPL

Shareholders

53.76%

Listed

Unlisted

Pursuant to a Scheme of Arrangement

KFL

Listed

0.5%

NPIL transferred its stake in GGPL to KFL pursuant to a scheme of arrangement at book value

KFL issued its shares to the shareholders of NPIL in the ratio of 1: 4 as consideration of such transfer and got listed


NPIL

GGL*

Shareholders

Listed

KFL Merged into GGL in 2007

KFL was merged into GGL in 2007 pursuant to a scheme of Amalgamation

The shares of GGL held by KFL were cancelled pursuant to such amalgamation

GGL issued its shares to the shareholders of KFL in the ratio of 1:1

GGL shares were listed in February 2008

0.28%

Listed

*The company was converted into a public ltd. company in March 2007


Case Study - Nicholas Piramal India Ltd

Pre-Demerger

EQ ( In Crs. ) 38

Price-June03 62

Market Cap. 1,177

Sensex 3,793

Post-Demerger

NICHOLAS PIRAMAL

EQ ( In Crs. ) 38

Listing Price 130

Nicholas Piramal - Market Cap. 2,470

Sensex 4,709

KFL

EQ ( In Crs. ) 10

Listing Price 40

Market Cap. 40

Sensex 4,709

Total Market Cap. On Demerger 2510

Incremental Market Cap 1,333

% Wealth Creation 113.3%

Present Market Cap.

Nicholas Piramal @ 235 4,910

GGL @ 68 68

Total 4,978

Sensex (Nov4, 2008) 10,631

Market Cap ( x ) 4.2


Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


ASSETSBuilding at Goa

Shares in Reliance EnergyReliance Power

Hirma Power Pvt LtdJayamkondam Power Pvt LtdRleiance Thermal Energy Pvt

Ltd

LiabilitiesRelated Loans


Coal based energy Undertaking

Reliance Industries Ltd Shareholders

ASSETSBuilding at Bandra (E),

Mumbai

Shares in Reliance Patalganga

Power Ltd


ASSETSBuilding in New Delhi

Shares in Reliance Capital

Reliance General InsuranceReliance Life Insurance


ASSETSBuilding, Plant & Machinery, Vehicles

and Equipment located at various locations

Receivables for capital leases

Shares in Reliance Communication Infrastructure

Reliance TelecomReliance Infocomm

World Tel holding LtdPreference shares of Reliance

Telecomm


Gas based energy Undertaking

Financial Services Undertaking

Telecom Undertaking

Remaining Undertaking

Reliance Energy Ventures Ltd Reliance Natural Resources

Ltd (formerly Global Fuel Management Services Ltd.)

Reliance Capital Ventures Ltd

Reliance CommunicationsVentures Ltd

Petrochemicals, Oil & Gas, Textiles and other business

As per the Scheme of De-merger, business of RIL was segregated into five undertakings as illustrated below. These undertakings were hived off into four subsidiaries. Each of these subsidiaries issued its shares to the shareholders of RIL in the ratio of 1:1

Appointed date – 01st September 2005, Effective date – 21st December 2005, Record date – 25th January 2005

Case Study - Reliance Industries Ltd


RIL

RCL

Scheme of Arrangement between Reliance Industries (RIL) and Reliance Capital Ventures Ltd. (RCVL) for demerger of financial services undertaking to RCVL

Scheme of Arrangement between RCVL and Reliance Capital Ltd (RCL) for amalgamation of RCVL with RCL

Demerger Scheme - Appointed Date – 01st September 2005, Effective Date – 21nd December 2005

Shareholders

42.70%

Listed

Listed

Prior to Schemes of Arrangement

RIL

RCL

Shareholders

42.70%

Listed

Listed

Pursuant to Scheme of De-merger

RCVL

Listed

De-merger of Financial Services

Undertaking

- RCVL was incorporated on 3rd September 2004 and the financial services undertaking of RIL was transferred through the scheme of demerger to RCVL

- RCVL issued its shares to the shareholders of RIL in the ratio of 1:1 as consideration of such transfer

- RCVL got listed through the scheme of demerger


RIL

RCVL

Shareholders

Listed

Pursuant to Scheme of Amalgamation

RCL

- RCVL was merged into RCL in 2006 pursuant to a scheme of Amalgamation

- RCVL shareholding in RCL was cancelled pursuant to such amalgamation

- RCVL shareholders received shares of RCL in the ratio of 5:100

Listed


Case Study - Reliance Industries Ltd (Contd)

RCVL merged into RCL



• Scheme of Arrangement between Reliance Industries (RIL) and Reliance Natural Resources Ltd. (RNRL) for de-merger of gas based energy undertaking to RNRL

• De-merger Scheme - Appointed Date – 01st September 2005, Effective Date – 21nd December 2005

Prior to Scheme of Arrangement

- RNRL was incorporated on 24th April 2000 with a paid up capital of Rs. 5 Lakhs as a wholly owned subsidiary of RIL

Pursuant to a Scheme of De-merger

- RNRL issued its shares to the shareholders of RIL in the ratio of 1:1 as consideration of such transfer

- RNRL shares were be listed pursuant to such scheme

- RIL Shareholding in RNRL was cancelled pursuant to the scheme

RIL

RNRL

Shareholders

Listed

Listed

Reliance Patalganga Power Ltd


RIL

RNRL

Shareholders

Listed

RIL

RNRL

Shareholders

Listed

Unlisted

Reliance Patalganga Power Ltd

Unlisted

100% 100%

ListedReliance

Patalganga Power Ltd

Post Scheme of De-merger

100%



Pre-Demerger

RIL

EQ ( In Crs. ) 1,394.15

Price-Jan '06 850

Market Cap. 118,490

Sensex 10,370

RELIANCE CAPITAL

EQ ( In Crs. ) 245.63

Price-Jan '06 450

Market Cap. 9,950

Sensex 10,370

Post-Demerger

RELIANCE Inds.

EQ ( In Crs. ) 1394.2

Listing Price 730

Market Cap. 101,762

Sensex 10,735

RELIANCE COMMUNICATION

EQ ( In Crs. ) 611.5

Listing Price 300

Market Cap. 36,660

Sensex 10,735

RNRL

EQ ( In Crs. ) 611.57

Listing Price 17.5

Market Cap. 2,269

Sensex 10,565

RELIANCE CAPITAL

Listing Price 500

Market Cap. 10,436

Sensex 10,735

Total Market Cap. - Demerger 151,127

Incremental Market Cap. 22,687


Present Market Cap.

RIL @1455.20 229,018

RCOM @250 51,704

RNRL @56 9,088

RCAP @740 18,154

Total 307,964

Sensex (Nov4, 2008) 10,631

Market Cap ( x ) - Since Jan'06 2.6


Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


Case Study - Bharat Forge

Bharat Forge – Significant Group Company holdings and non core assets

BF Utilities – All businesses apart from forging business demerged into BF Utilities

Pre-Demerger

EQ ( In Crs. ) 18.83

Price – Aug 01 12

Market Cap. 250

Sensex 2,812

Post-Demerger

BHARAT FORGE

Listing Price 10

Market Cap. 200

Sensex 3,279

BF UTILITIES LTD

Listing Price 18

Market Cap. 54

Sensex 3,279

Total Market Cap.- Demerger 254

Incremental Market Cap. 4

% Wealth Creation 2%

Present Market Cap.

BHARAT FORGE @ 110 2,417

BF UTILITIES @ 735 2,770

Total 5,187

Sensex (Nov4, 2008) 10,631 Market Cap ( x ) - Since Aug 01 20.7


Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


Some more cases….

Pre-Demerger

EQ ( In Crs. ) 190.34

Price June 06 240

Market Cap. 4,567

Sensex 10,744

Post-Demerger

GE SHIPPING

EQ ( In Crs. ) 152.27

Listing Price 225

GE Shipping - Market Cap. 3424.5

Sensex 13,385

GREAT OFFSHORE

EQ ( In Crs. ) 38.12

Listing Price 730

Market Cap. 2781.3

Sensex 13,385

Total Market Cap. On Demerger 6205.8

Incremental Market Cap Attained 1638.6


Present Market Cap.

GE Shipping @ 210 3,212

Great Offshore @ 337 1,253

Total 4,464

Sensex (Nov4, 2008) 10,631

Market Cap ( x ) - Since June ' 06 1.0

GE Shipping GTLPre-Demerger

EQ ( In Crs. ) 85.69

Price -July06 140

Market Cap. 1,198

Sensex 11,699

Post-Demerger

GTL

EQ ( In Crs. ) 85.3

Listing Price 150

Market Cap. 1,280

Sensex 13,137

GTL Infra.

EQ ( In Crs. ) 320

Listing Price 25

Market Cap. 800

Sensex 13,137

Total Market Cap. On Demerger 2079.5

Incremental Market Cap Attained 881.1


Present Market Cap.

GTL @ 196 1,855

GTL Infra. @ 38 2,964

Total 4,819

Sensex (Nov4, 2008) 10,631

Market Cap ( x ) - Since July 06 4.0

Pre-DemergerEQ ( In Crs. ) 43.35Price - Dec ' 06 300Market Cap. 12,990 Sensex 14,090

Post-DemergerZEE Entertainment EQ ( In Crs. ) 43.36Listing Price 275Market Cap. 11,924 Sensex 13,362 WWIL EQ ( In Crs. ) 21.72Listing Price 130Market Cap. 2,824 Sensex 13,362 ZEE News EQ ( In Crs. ) 23.98Listing Price 40Market Cap. 959.2Sensex 13,362 DISH TV EQ ( In Crs. ) 42.82Listing Price 110Market Cap. 4710.2Sensex 13,362 Total Market Cap. - on Demerger 20,417 % Wealth Creation 57.2%

Present Market Cap. ZEE Entertainment @ 154 6,684 WWIL @13 273 Zee News @ 40 944 Dish TV @ 18 1,682 Total 9,583 Sensex (Nov4, 2008) 10,631 Market Cap ( x ) - Since Dec.06 0.7

ZEE Telefilms


Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


Case Study - Sterlite

Listing

1993 1996 1997 1998 2000 2001 2003 2007

1993

Rights cum Public Issue

1996

Sterlite Communications IPO Setup as a subsidiary

1997

Merger of Sterlite communications with Sterlite

1998

Indal Hostile takeover bid

2000

Demerger of Sterlite optic from Sterlite

2001

Acquisition of Balco from GoI

2002

2002

Acquisition of HZL from GoI

2003

$1 bn Vedanta Listing

Aug 2007

ADR $2 bn


Three Tier Structure

Vedanta

Sterlite

Balco Hind Zinc Sterlite Energy Vedanta Alumina

Copper Mines


Creating Value for Promoter

Promoter Holding Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08

Indian Promoters 1.5% 1.5% 0.0% 0.0%

Malco 0.0% 4.6% 7.1% 7.1% 4.7% 4.6% 4.6% 3.61%

Twinstar Holding 35.4% 35.4% 55.1% 60.2% 73.6% 72.3% 72.3% 56.98%

PAC 1.6% 1.6% 4.3% 4.0%

Employee Trust 0.0% 7.4% 11.5% 7.0% 3.2% 3.2% 3.2% 2.51%

Total 38.5% 50.4% 78.1% 78.3% 81.5% 80.0% 80.1% 63.1%

Market Cap (Rs. Crs) 167 228 210 576 1606 4569 26158 50579

Events EWT+ Malco EWT+ Malco+

Buyback

Creeping Rights ADR


Agenda

ENAM

About Restructuring




TV 18 India Limited


Sterlite

Bharat Forge

Other Cases


Case Study - TV 18 India Limited

Objective

Consolidate their media business which creates a Group structure (and reorganize capital its own capital) that is expected to unlock significant shareholder value.

Pre Scheme Scenario

“CNBC Awaaz” and the general news English Channel – “CNN IBN” were held in promoter entities & legally not part of the listed entity, due to government restrictions

August 22, 2003 News Uplinking Guidelines-

Eligibility criteria for an applicant company desirous of uplinking news and current affairs TV channel(s) from India

It is registered / incorporated in India under the Companies Act, 1956;

Foreign direct investment in the applicant company does not exceed 26% of the total paid up capital *

Indian shareholder to hold at least 51% of the total equity (excluding the equity held by Public Sector Banks and Public Financial Institutions as defined in section 4A of the Companies Act, 1956) in the new entity

TV18 was non compliant and hence would not have got necessary licenses to operate the business; its current license on CNBC-TV18 was under threat

Reason for proposed restructuring

Compliance with uplinking norms

Forced restructuring allows opportunity to consolidate businesses for TV18 Shareholders

TV 18 India Limited Promoter owned Holding company

CNBC TV 18 – English business news channel Awaaz – Hindi Business and Consumer Channel

Moneycontrol.com – Financial portal IBN – General News Channel(s)+ Portals

Commoditiescontrol.com –Commodity info portal


Case Study - TV 18 India Limited (cont’d)

Scheme

Demerger of Media Investment Undertaking

Merger of Indian News Business Undertaking of SGA News Limited

Consolidation of both AWAAZ and CNN IBN Channels

Existing shareholder of TV18 holding 10 shares of face value Rs 10 each would end up with

12 shares of face value Rs 5 each in Network Ltd

14 shares of face value Rs 5 each in TV18. Shareholders of SGA News for every 1 equity share of face value of Rs 10 each would get 3.67 shares of face value of

Rs 5 each to

Mr. Raghav Bahl transferred 2,868,225 Equity shares of face value Rs.10/- per share (Prior to the Record date) to Network 18 Media and Investments Limited pursuant to the Scheme

Implications

Creation of 2 listed entities Network 18 would be the holding company for strategic and financial group investments and TV 18 would act as

the operating company

No effective dilution for TV18 Shareholders

30% Reduction in capital

Funding Options for Growth improve manifold


Case Study - TV 18 India Limited (cont’d)

Pre-Demerger

EQ ( In Crs. ) 26.20

Price - Sep'06 600

Market Cap. 1,572

Sensex 12,962

Post-Demerger

TV 18

EQ ( In Crs. ) 28.28

Listing Price 630

Market Cap. 3,553

Sensex 14,403

NETWORK 18

EQ ( In Crs. ) 25.43

Listing Price 300

Market Cap. 1,524

Sensex 14,403

Total Market Cap.- Demerger 5,077

Incremental Market Cap. 3,505

% Wealth Creation 223%

Present Market Cap.

TV18 @ 85 1,000

NW18 @ 100 610

Total 1,610

Sensex (Nov4, 2008) 10,631

Market Cap ( x ) - Since Sep.06 1.0

Strictly Private & Confidential

ENAM Securities Pvt. Ltd.801, Dalamal Tower, Nariman Point, Mumbai- 400021Tel – 91-22-6638 1800, Fax – 91-22-2284 6824

T h a n k Y o u

s subramanian

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