M&A Critique - January 2020

Activity in M&A deals worldwide and in India has been quite slow as compared to the previous year. A report from Baker Mackenzie noted that M&A deals in India would close at just over $52 Billion in 2019 as compared to close to $81.6 Billion in 2018. Activity will remain at the same level in 2020 or slower than 2019. But the silver lining in the news is that many deals in 2018 were distress sales the trend for which should come down. In this year the major contributors to the deal activity can come from various sectors especially if the government is successful in divestments in the Bharat Petroleum, Air India and merger of BSNL and MTNL. Also, a lot of value can also be unlocked with resolution of insolvency proceedings against several ongoing cases. Changes in govt. regulations and capacity to quicken the process should also contribute to cross-border deals.

Prism Johnson is one of India’s well-known Integrated Building Materials Company, mainly operating in 4 divisions Cement, ready-mixed concrete (RMC), tiles, bath, kitchen products (TBK) and Insurance having 5 subsidiaries, 3 step-down subsidiaries and 8 JVs. The retail and trading of TBK business albeit performing well is segregated over 6 different companies. Company’s board in order to consolidate the TBK business have approved the demerger in its 4 arms and merge 2 subsidiaries. In this article we look at the possible simplification in structure and cost & logistics benefits from the transaction.

Government of India is adamant to keep its target to unlock value in PSUs by way of disinvestment and privatizing lot of companies traditionally run by the government. Bharat Petroleum is one of the most profitable oil companies and the govt. has approved to sell its 53.29% stake in the company which could fetch at least 56,000 Crores at the current market cap of the company. The move can truly privatize the petrol, diesel and gas retail outlets in the country but would only work when the govt. reduces or plays no role in the fixing the oil prices. Privatization can also make some of the current stakeholders fearful (especially current employees) seeing it as an imminent change in culture which needs to be addressed by the government as well.

After almost 3 years, Cyrus Mistry is in the news after NCLAT passed an order to reinstate him as the Chairman of Tata Sons after his removal from the board in October 2016. Tata Sons moved the apex court against the order. In this legal article we look at how the story unfolded and whether laws of corporate governance were misused and who stands in the right.

Demergers, which are expected to unlock shareholder value, have not worked in favour of shareholders of Omkar Speciality Chemicals and Lasa Supergenerics. We had covered the merger-demerger transaction of Omkar Specialty Chemicals in our July 2016 issue.   One may look at as a case study how corporate restructuring was (mis)used to divert funds and hide under performance. In this issue we see how (un)fruitful the demerger has been for all its stakeholders while on the verge of entering the insolvency process.

Rolta India Ltd would have undergone insolvency proceeding as per application filed under sec 7 by the creditors claiming a default of around ?1060 Crores on 14th Nov 2018. But the order passed by the NCLT was challenged by Kamal Singh, director of the company, on the basis that the some of the rules were not followed and instead of the approaching NCLAT approached the High Court via a writ petition against the NCLT order. Post hearings, the Mumbai High Court has quashed and set aside the order which in turn shall make the creditors to make fresh  application to the NCLT .

Along with Regular Features……...