M&A Critique - April 2018 - Editorial

Insolvency cases filed with NCLT are increasing as we progress into the new financial year along with lot of changes being tweaked in the law as well to accommodate nuances which are being uncovered during the resolution process. Even though some of the biggest cases have been extended beyond the 180 days of resolving the case, it definitely has triggered a need for large creditors (read PSU banks) to rethink their internal checking system to make it more robust and maybe less human dependent. The irony in today’s world is the individual data is no longer safe and can easily be bought but data for corporate doesn’t seem to be easily available or the creditors are simply not interested to rely on such data to make their decision to lend or not. 

Our Cover Article is about Indian Education Services, a subsidiary of HT Media, demerging its B2C education services which is not doing so great to Hindustan Media, also a subsidiary of HT Media, which has a good market reach and share in north and east India with its print and media business. Although the scheme deems the transaction as strategic fit, it seems that a cash-rich subsidiary will fund the -loss making B2C business of another subsidiary till it becomes profitable.

Sona Koya is a well-known name amongst Auto manufactures, a successful joint venture which manufactures steering systems for passenger car and utility vehicles. It has been going through restructuring since the last couple of years and its seems that JTEKT, its Japanese holding company, shall now acquire whole of the steering systems business through JTEKT Sona and let SONA group focus on the forging business only. The restructuring seems to be triggered by JTEKT Corporation global policy to expand and gain market share in each and every individual market they are present currently.

Magma Fincorp, a NBFC primarily focused on Asset Finance, recently took over the 26% stake from it JV partner International Tractors in Aug 17. Post which it decided to merger it wholly-owned subsidiary Magma ITL which is focused on tractor financing. The merger seems to have only operational synergies and unless Magma group makes a change in the strategy to expand and improve its internal credit evaluation there seems to be no long-term synergies foreseen for any stakeholders.

Government has number of General (Non-Life) Insurance Companies and as we have seen in last few articles, their consolidation seems to be a way forward to increase overall profitability and to achieve economies of scale in their operations. Our honorable Finance Minister has just announced a merger of three General Insurance Companies viz. National Insurance, United India Insurance and Oriental Insurance. New India Assurance, the largest amongst the four is left alone for now. The merger shall create a giant entity which the government can then divest at higher valuation and raising more money which should be used to increase insurance penetration which is very low to many other developing and developed nations.

We see very few restructuring in companies providing pure consumer services other than finance or insurance in India. A complex restructuring was announced where ADI BPO services after demerging its Infra Management business into ADI Media which get amalgamated into MPS Limited so that the company becomes complaint of new provisions of the Companies’ Act,2013 of acquisition. MPS actively does acquisitions to strengthen its Publishing services business to reach more markets locally and globally. The latest acquisition though seems to be more out regulatory purpose then any major benefit to the stakeholders

Our legal articles, cover couple of insolvency cases and a scheme by the Registrar of companies for directors of strike-off companies to redeem themselves by compliance of financial data to keep them for getting disqualified altogether.

Alongwith other features…

Check out the full magazine here.