Emerging Opportunities Move into a higher gear Atul Mittal Director, Deloitte Touche Tohmatsu Pvt. Ltd. December 3, 2011
India Growth Story 2
Key industries will continue to grow Emerging Economy 3rd largest economy by 2025 400 million consumer class Billions being invested in infrastructure Mobile Telecom Actual connections till 2006: 125million Connections at Oct 2010: 707million Flying High Passengers in 2005: 32million Passengers in 2010: 57million Est. Passengers in 2015: 108million 3 India Inc. Acquisitions in 2008: 196 Value of acquisition: USD 13.1 billion Acquisitions in 2009: 82 Value of acquisition: USD 1.4 billion Acquisitions in 2010: 198 Value of acquisition: USD 22.5 billion Infrastructure World leading Infrastructure sector 11 th plan (2007-2012): USD 520billion 12 th plan (2012-2017): USD 1trillion Patiala Peg World s largest whisky market 2006 est. sales: 80million cases 2009 est. sales: 119million cases. 2010 est. sales: 131million cases.
A day in the life of India Refrigerators 12,602 Televisions 33,972 Watches 125,000 Jeans 72,329 Beer 8.6 million (bottles) Air Tickets 95,890 4
A day in the life of India Gold 1,918 kg Water 5.7 million (bottles) Soft Drinks 19.6 million (bottles) Cars 3,880 Two Wheelers 35,264 Washing Machines 4,274 Movie Tickets 10.9 million 5
But paradoxes will remain 6
Why You.
Your Services 8
Your Services Advisory services to all service lines on issues related to: Advisory Corporate and Allied Laws Competition Law Exchange Control Regulations FCRA Employment and Industrial Laws Environmental Laws ESOP, ESPS, Sweat Equity, RSUs etc. FDI Policy IPRs Sectoral Regulations SEBI and Capital Market Regulations Stamp Duty Laws Setting up entity in India viz. Companies, LLPs, Trust, Partnerships etc. Setting up of Industries in India, initial permissions and registrations and complete hand holdings M&A and Transaction related services 9
Your Services Structuring Cross-Border Transactions/ Investments: Advisory Based on FDI Policy, Exchange Control & Applicable Sectoral Regulations Government Interface Structuring the investments/ transactions Financial Model Review Joint Venture Support Documentation Support 10
Your Services Obtaining specific approvals and clarifications, as may be required, from regulators to establish / expand business presence in India: Competition Commission of India Department of Industrial Policy and Promotion Department of Scientific and Industrial Research Foreign Investment Promotion Board Ministry of Finance Ministry of Commerce and Industry Ministry of Corporate Affairs Ministry of Home Affairs Reserve Bank of India Registrar of Companies Registrar of LLP Regional Director Securities and Exchange Board of India Stock Exchanges 11
Your Services Approvals for recognition and approval of in house R&D unit from DSIR under section 35(2AB) of Income Tax Act, 1961 Registrations under Industrial Park Scheme from CBDT Approvals from CBDT relating to tax exemption under section 10(6C) of the Income Tax Act, 1961 Representing before the Reserve Bank of India, SEBI and Regional Director for compounding of contraventions Registration of STPI from Director STPI Approval from Development Commissioner for establishing SEZ units Many more. 12
Your Services Undertaking intricate compliance prescribed by regulations made under the provisions of : Compliance Corporate and allied Laws Competition Law Compliance Manual and SOPs Exchange Control Regulations Employment & Industrial Laws IPRs Legal and Regulatory Health Checks NBFCs, CICs Trusts, Partnership, Society, FCRA SEBI and Capital Market Regulations 13
Compliance Why India is Important High Corruption Perception Index (CPI) as per Transparency International latest survey results - India CPI score 3.3 for 2010 as compared to CPI 3.4 for 2009 Recent history of corruption or fraud cases (CWG scam, IPL scam, 2G Spectrum scam) involving joint venture companies CBI initiative to punish passive bribery (payer of the bribes) under the Prevention of Corruption Act (PCA), cover companies involving in corrupt activities e.g. Dow Chemicals Lack of strict enforcement of laws and regulations Increased foreign direct investment in recent years and major investments in infrastructure development Large private sector consisting family owned business with lack of effective governance Culture with prevalence of gifts and hospitality 14
Compliance with Applicable Laws Income Tax Act The Customs Act The Foreign Trade Policy The Central Excise Act The Service Tax Laws The Central Sales Tax Act The UP Value Added Tax Act The Entry Tax laws The Employee Provident Fund & Miscellaneous Provisions Act Employee State Insurance Act The Payment of Gratuity Act The Minimum Wages Act The Payment of Wages Act Payment of Bonus Act Shop & Establishment Act Companies Act LLP Act FEMA Competition Act IDRA Foreign Corrupt Practices Act Prevention of Corruption Act
Approach & Methodology Overview Understand Assess Priority Evaluate Compliance Best Practices Understand the business, nature of operations, geographical presence and applicable laws and regulations Assist to identify the priority areas based on various factors e.g. govt. touch points, consequences etc. Classification of priority areas into High, Medium and Low Understand existing key controls/processes for compliance Perform sample checks Identify instances of noncompliances Recommend procedures Review existing compliance structure Recommend global best practices including advice on internal escalation protocols Incorporate the learnings 16
Why the compliance risks matter Penalties and fines Risk of ban on business consequences of noncompliances Prosecution and imprisonment Loss of reputation and other bad press Loss of investor confidence and reduction of shareholder value 17
M&A Deal A Snapshot Business Restructuring Capital Restructuring Acquisition Family Settlement Amalgamation Demerger Slump sale Slump sale Court process Asset sale/ Itemized sale Buy back of shares Buy back through scheme of arrangement Capital reduction Preferential issue of shares Variation of shareholders rights Differential right shares Acquisition of Indian Company by foreign Company/another Indian Company Stock acquisition Business acquisition - Asset purchase vs slump purchase Cash deal vs share swap or a combination of both Joint ventures Scheme of arrangement Merger / demerger / hive off Share swaps Buyer Deloitte Target 18 2010 Deloitte Touche Tohmatsu India Private Limited
Your range of services Objective Developing Broad level regulatory strategy based on transaction objective Analysis of target s level of regulatory compliances Assessing Impact of adjustment & cost of regulatory non compliances to purchase price Purchase agreement Considerations Optimizing tax opportunities giving due consideration to the transaction cost Implementing the selected strategy Ensure post deal integration Value Chain Pre-Deal Advisory Due Diligence Transaction Structuring Post Deal Advisory How Deloitte Can Help Identifying alternative structures High level understanding of potential & regulatory issues Identifying opportunities connected with the transaction Detailed regulatory review & analysis of: Various compliances Dispute and Litigations Risk Cost analysis Risk mitigation strategy including assistance in seeking requisite Government approvals Innovative investment structures Innovative financial structures Purchase price allocation Managing future compliance costs JV structuring and agreement review Exit strategies End-to-end assistance in a section 391-394 arrangement including supporting lawyer during Court process Obtaining regulatory approvals from various Government bodies such as FIPB, RBI, etc. Assistance in post deal compliance requirements (eg. Intimations to various authorities 19 2010 Deloitte Touche Tohmatsu India Private Limited
ATUL MITTAL Thank You Director Tax & Regulatory Services Deloitte email: atulmittal@deloitte.com Tel: +91 (124) 46792828, Mobile: +91 9810065744 20
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