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Securities Market Money Market (Market for short term debt products) Capital Market (Market for Securities Market Money Market (Market for short term debt products) Capital Market (Market for long term securities in equity & debt) Primary Market (Through Issuance) Equity Market • Companies • Other bodies corporate Wholesale Segment (Institutional investor) Secondary Market (Through stock exchange trading) Debt Market • Govt. Securities • Corporate debt Derivative Market (Exchange traded instruments) • Options market • Futures market Retail Segment (small investors) 1

Investment Banking • Non-Fund based • • Merchant Banking Services for: Management of Public Investment Banking • Non-Fund based • • Merchant Banking Services for: Management of Public offers of equity/debt instruments Open offers under takeover code. Buy-back / Delisting offers • • • Underwriting Market making Investments in Primary markets • • • Advisory and Transaction services in: Project Financing Syndicated Loans / Structured finance products Venture capital / private equity Private placement of debt / equity Business advisory / financial restructuring Corporate Re-organisation such as M & A demergers, hire off asset sell off Govt. disinvestments & Privatisation 2

Regulatory & Statutory Authorities • • • Department of company affairs SEBI Department of Regulatory & Statutory Authorities • • • Department of company affairs SEBI Department of economic affairs Reserve Bank of India Stock Exchange Boards Central board of Direct Taxes Central board of Excise & Customs SFIO Enforcements Directorate 3

SEBI – Market regulator SEBI was incorporated in April 1988 with an objective to SEBI – Market regulator SEBI was incorporated in April 1988 with an objective to act as a regulatory for capital markets. Functions: a. Investor protection : to ensure steady flow of savings in the capital mkts. b. Ensuring fair practices by issuers of securities. c. Promotion of efficient services by brokers, merchant bankers and other intermediaries. 4

SEBI Guidelines Influences raising of capital Issuer status Initial Public Offering : Treasury issue SEBI Guidelines Influences raising of capital Issuer status Initial Public Offering : Treasury issue / offer for sale Composite issues. Deployment of issue proceeds. Lock in period Preferential offers brought under purview 5

Equity capital to be greater than Rs. 10 crores for listing on BSE / Equity capital to be greater than Rs. 10 crores for listing on BSE / NSE and Rs. 5 crores for other exchanges & conformity with other listing guidelines At least 25% to be offered to public by way of a prospectus to be in conformity with listing guidelines. Book building / Private placement allowed. Debt : Equity : Normally 2: 1, relaxed in capital intensive projects. Offer for Sale : IPO / Secondary Public Offer Disclosures in offer document. 6

Norms for issuance of capital Public issue by Unlisted Companies: No unlisted company shall Norms for issuance of capital Public issue by Unlisted Companies: No unlisted company shall make a public issue unless the company has : • IPO’s of issue size up to 5 times the pre-issue net worth can be allowed only if the company has a track record of distributable profits in terms of section 205 of companies act, for at least three out of the immediately preceding five years. For issue size greater than 5 times net worth book building mandatory • A pre issue Net worth of at least Rupees One crore in at least three out of the preceding five years with the minimum requirement to 7 be met for the immediately preceding two years.

 • • • An unlisted company which does not satisfy the above conditions • • • An unlisted company which does not satisfy the above conditions can make a public issue provided a Public Financial Institution or a Scheduled commercial bank : Has appraised the project and has financed at least 10% of the cost of the project by way of Equity / Debt. Book building made mandatory in respect of IPO’s without track record including the stipulation that 60% to be alloted to QIB’s The appraising Bank / Institution brings in the money at least one day before the opening of the public issue. Minimum level of public offering has to be at least 10% of 8 post issue capital.

PRICING OF SECURITIES BY COMPANIES • Companies eligible to make Public Issues can freely PRICING OF SECURITIES BY COMPANIES • Companies eligible to make Public Issues can freely price their securities. • Differential Pricing : Allotments made to firm category must be at a price higher than that made to open public category. 9

Public Issue By Listed Companies A Listed Company shall be eligible to make a Public Issue By Listed Companies A Listed Company shall be eligible to make a public issue if as a result of the proposed issue Net worth of the Company becomes more than Five times the Net worth prior to the Issue. And also the Company satisfies the conditions as applicable to an Unlisted Company pertaining to track record of distributable dividends as per sec 205 of companies act. Free pricing to be determined by lead managers. The above guidelines are not applicable to : • Banks / NBFC’s • Infrastructure Projects 10

Methodologies for making issues • 100% Retail (Fixed price) Issue • Book Built (Price Methodologies for making issues • 100% Retail (Fixed price) Issue • Book Built (Price discovery) Issue – – – Floor price fixation Cap not more than 20% of floor price Book running lead manager Updation of bids on real time basis during biding period Red Herring prospectus Allocation / reservation for institutional / QIB’s 11

Guidelines for Debt Securities Creation of a Debenture redemption reserve mandatory in the event Guidelines for Debt Securities Creation of a Debenture redemption reserve mandatory in the event maturity in excess of 18 months. DRR aggregating to 50% of the issue price to be created before redemption commences. Creation of charge within 6 months Conversion of Instruments : - Conversion at the option of the investor if conversion terms not specified at issuance time. - FCD’s with conversion periods greater than 36 months shall give put and call options to the investors. - If conversion is between 18 and 36 months conversion at the option of the investor. 12

Other regulations • Credit Rating of Debt Instruments mandatory irrespective of maturity or conversion Other regulations • Credit Rating of Debt Instruments mandatory irrespective of maturity or conversion terms. For debt securities greater than Rs 100 crs credit rating from two agencies mandatory. • All credit ratings obtained in the last 3 years shall be disclosed in the offer document. • Outstanding warrants or financial Instruments would get the same rights / benefits. • All partly paid up shares shall be made fully paid up / forfeited before a public issue. • Interest rates & terms of conversion freely determined 13

Pre Issue Obligations • • • Lead Merchant Banker shall exercise due-diligence Inter - Pre Issue Obligations • • • Lead Merchant Banker shall exercise due-diligence Inter - se allocation of responsibilities Appointment of intermediaries Underwriter’s ability to discharge obligations Offer document to be made public Appointment of compliance officer Press advertisements Agreements with depositories Additional disclosures regarding Khoka buy back, security etc 14

Promoters contribution &Lock in arrangements • In a public issue by an unlisted company Promoters contribution &Lock in arrangements • In a public issue by an unlisted company the promoters contribution shall be at least 20% of the post issue capital. • In a public issue by a listed company the promoters shall participate either to the extent of 20% of the proposed issue or ensure post-issue holding of 20%. • In case of any issue to the public promoters equity upto 20% will be locked in for a period of 3 years from the date of the public issue or the date of commencement of commercial production which ever is later. . • In case of public issue by an unlisted company promoters holding in excess of 20% will be locked in for 1 year. • Locked in securities can only be pledged with banks & FI’s 15 as collateral's for loans given to the company.

DISCLOSURES IN OFFER DOCUMENT Minimum Subscription Clause Issue Schedule Intermediaries and Auditors Credit Rating DISCLOSURES IN OFFER DOCUMENT Minimum Subscription Clause Issue Schedule Intermediaries and Auditors Credit Rating Underwriting of the issue Capital Structure of the Company Details of major shareholders Terms of Issue Utilisation of Issue proceeds 16

Project cost & Means of Financing Company, Management, project details Plant, Machinery, Process & Project cost & Means of Financing Company, Management, project details Plant, Machinery, Process & Technology Collaborations, Performance guarantees etc. Products & Services, Capacity & Future prospects Stock market data, Past prices, Bonuses etc. Financials of group companies Basis of issue pricing Past Financial data 17

Foreign Direct Investments • • Inward Investments : FIPB & Automatic approval routes Exemptions Foreign Direct Investments • • Inward Investments : FIPB & Automatic approval routes Exemptions for SEZ’s RBI delegated to sanction under automatic fresh ECB’s up to$400 million with interest cap of : Libor + for normal projects Libor + for infrastructure Repayment beyond 8 years. • RBI delegated authority to approve pre-payments if met from offshore issuance of equity. • Outward FDI up to 3 times the network under automatic approval route. • Inward FDI in secondary markets and real estate regulated. 18

Structured Financial Products Rupee convertibi lity Cost driven economy Economies of scale Interest rate Structured Financial Products Rupee convertibi lity Cost driven economy Economies of scale Interest rate volatility B u y - b a c k o p t i on Risk Assignement 19

 • Transaction costs and phasing out of intermediaries • Partial convertibility of currency • Transaction costs and phasing out of intermediaries • Partial convertibility of currency thereby opening accesses to offshore financing • Tax asymmetries that can produce tax savings for the issuer, investors or both • Opportunities to reduce or reallocate risk • . Volatile inflation indexed interest rates • Better understanding of risk-return characteristics of existing • Investor wish list. • Make debt attractive by offering sweeteners. 20

Structured financing Instruments * Equity shares with differential voting rights * External commercial borrowings Structured financing Instruments * Equity shares with differential voting rights * External commercial borrowings & Depository receipts (limited to 25% of issued capital) * Non Voting shares. * Multiple option debentures / SPN’s * Exchangeables * Deep discount bonds. * Floating rate notes * Rupee enhanced structured bonds * Zero coupon bonds * NCD with tradable warrant. * Derivative linked bonds. 21

Offshore financing - Rupee convertibility on current account - Low cost borrowings - Large Offshore financing - Rupee convertibility on current account - Low cost borrowings - Large avenues of funds with low flotation cost. - Elimination of licensing has resulted in large size projects which need low cost means of financing. to ensure project viability - In FCCB’s / GDR’s company’s issue rupee denominated instruments and hence do not carry foreign exchange risk 22

- No voting rights thereby does not result in dilution of control - Flexibility - No voting rights thereby does not result in dilution of control - Flexibility in tax planning - Lower tax rates on dividends/ interest rates - Reduces wt. av. cost of capital - No lock in period for GDR’s - Improves credibility of the issuer due to international due diligence - Risk of foreign exchange fluctuations - Ideal source for companies with a natural hedge 23

ECB’s Swapping of ECB’s with other corporate loans disallowed. - - Priority to infrastructure ECB’s Swapping of ECB’s with other corporate loans disallowed. - - Priority to infrastructure projects. -GOI approval for issue size beyond $400 million -Funds to be utilised for financing imports and to be parked offshore till point of usage. -Remain as debt throughout the life of the instrument. - Average life to be 8 years. - Interest rate ceiling of Libor + 200 basis points. 24

Depository receipts * Depository receipts are negotiable certificates that represent company’s publicly traded equity. Depository receipts * Depository receipts are negotiable certificates that represent company’s publicly traded equity. * Can be quoted on any international exchange. * Company’s could directly issues GDR’S or by conversion of FCCB’s. * Indian company will issue shares to custodian in India who will inturn instruct foreign depository to issue receipts which can be traded since Indian stocks cannot be traded on international exchanges. * Provides international investor with settlement in his local exchange. * Investor can convert GDR’s into a fixed number of equity shares at any time. * Depositary receipts have no voting rights. * Trading of depositary receipts outside India will not attract tax liability in 25 India.

FCCB’s *‘ Put’ option to investor and ‘call’ option to “company”. * In the FCCB’s *‘ Put’ option to investor and ‘call’ option to “company”. * In the event FCCB is used to part finance project cost then “put” option would normally not be given during the gestation period. *Interest : Libor based (depending on conversion rate) with a cap of 150 basis points over Libor 26

Deep discount bonds * Zero coupon bond * Redeemed at face value Bond structure Deep discount bonds * Zero coupon bond * Redeemed at face value Bond structure : Deep discount bond has a face value of Rs. 1, 000/-. It was issued at a discounted price of Rs. 2, 700/- with a maturity period of 25 years. withdrawal / redemption Deemed face value At the end of 5 years Rs. 5, 700/- At the end of 10 years Rs. 12, 000/- At the end of 15 years Rs. 25, 000/- At the end of 20 years Rs. 50, 000/- 27

Basis of evaluation Redemption / withdrawal ------------ Investors yield --------- Cost to the company Basis of evaluation Redemption / withdrawal ------------ Investors yield --------- Cost to the company ------- AFTER 5 YEARS 13. 56% 16. 11% AFTER 10 YEARS 14. 15% 16. 00% AFTER 15 YEARS 14. 49% 15. 99% AFTER 20 YEARS 4. 51% 15. 71% ON MATURITY 14. 54% 15. 54% 28

Optional convertible debentures Issuer : Reliance petroleum Limited. Terms of the TOCD: - Face Optional convertible debentures Issuer : Reliance petroleum Limited. Terms of the TOCD: - Face value Part A Part B - Rs. 60/Rs. 20/Rs. 40/- Part ‘A’ Convertible into 2 equity shares at par Part ‘B’ Non convertible portion - Investor will receive two warrants per debentures to be called after 29 48 months.

CONVERSION TERMS FOR PART A - 1 Equity share of Rs. 10/- at par CONVERSION TERMS FOR PART A - 1 Equity share of Rs. 10/- at par on allotment - 1 Equity share of Rs. 10/- at par 18 months from the date of allotment. - No interest on the part ‘B’ of the TOCD for the first 5 years. 30

-REEDEMPTION OF PART ‘B’ OF RS. 40/PRINCIPAL INTEREST TOTAL 6 TH YEAR 7 TH -REEDEMPTION OF PART ‘B’ OF RS. 40/PRINCIPAL INTEREST TOTAL 6 TH YEAR 7 TH YEAR 8 TH YEAR 10 15 15 20 30 30 -------80 ---- Warrants: Two freely tradable warrants entitling the holder of the warrant to one equity share per warrant at Rs 20/-. 31

Options avaliable OPTION I : a) b) Retain the non convertible portion till maturity. Options avaliable OPTION I : a) b) Retain the non convertible portion till maturity. Sell warrants in the market. OPTION II : a) Surrender the non convertible portion and get two equity shares. b) Surrender the warrants and get 2 equity shares by paying Rs 20/- per warrant. OPTION III : a) Retain the non convertible portion till maturity. b) Surrender warrants receive 2 equity shares at Rs. 20 32

Assumptions - In all options the two initial equity shares that the investor gets Assumptions - In all options the two initial equity shares that the investor gets from part ‘A’ are held by him & do not receive dividend. - The IRR to the investor & cost of capital to the company will be affected by the dividend policy. - If shares received from part ‘A’ are sold in this time period, the IRR to the investor will be higher depending on the time & price. - Assumes no servicing cost for premium collected. 33

Advantages of the structure - Investor - Equity portion allows participation in profits. high Advantages of the structure - Investor - Equity portion allows participation in profits. high capital appreciation & - Debt part allows returns at a reasonable yield if equity returns are marginal. -Warrants allow entitlement to further equity at investors option. - Company - Would reduce interest during construction period for projects with large gestation periods. - Warrants add attraction to the instrument. - Low cost of instrument. - No servicing cost for 5 years. 34

Assumes market price of Rs. 45/- per share for analysis. Option I : Cash Assumes market price of Rs. 45/- per share for analysis. Option I : Cash flow (from investor’s point of view) Year cash flow ** 1 -20 2 -10 3 4* 5 6 7 -30 50 17 25. 5 (2 x 20 = Rs. 40/- cost of warrants) IRR = 16% 25. 5 35

Cash flow (from company point of view) Year Cash Flow 1 3 10 4 Cash flow (from company point of view) Year Cash Flow 1 3 10 4 5 +40 20 2 -20 6 7 30 -30 Cost of capital = 3% Option II Cash flow (investor) year 1 2 3 4 5 6 Cash -20 -10 -30 -40 Flow 100 * IRR = 26% * 4 equity shares sold at rs. 25/- each 7 - 36

Cash flows (company) Year 0 1 2 3 4 5 6 7 8 Cash Cash flows (company) Year 0 1 2 3 4 5 6 7 8 Cash +20 +10 +30 +40 Flow COC = negative (if one assumes funds collected are reinvested on short term basis) Option III Cash flow (investor) Year 1 2 3 Cash -20 -10 -30 Flow IRR = 17% Cash flow (company) (same as option I) 4 -40 50 5 17 6 7 25. 5 37

Enhanced structure bond • Local currency agency structured bond to cover imported Equipments with Enhanced structure bond • Local currency agency structured bond to cover imported Equipments with Rupee financing solution with limited foreign exposure risk • Multi laterals / Bilateral provide guarantees for investments from OECD countries to Emerging markets. • Credit enhancement by way of partial guarantees with more underlying flexibility in the structuring of the instrument. • Key advantage is not tying to any specific country as done by Export credit agencies like Exam banks etc. • Rupee credit enhanced structured bond is estimated to be atleast 200 to 250 basis points cheaper than Indian FI debt 38

Potential Credit Enhancers • ECAs provide term funding linked to import of capital goods Potential Credit Enhancers • ECAs provide term funding linked to import of capital goods as well as equity investments from OECD countries to emerging markets. Attractive financing can be achieved by utilising gurantees and / or subsidies. • Local bond / Debenture issuance denominated in local currency backed by credit enhancement by an ECA / Agency. • Borrower has a rupee currency obligation for the door to door tenure, except in the event of default. • Investor base includes local banks, mutual funds and insurance companies. • Credit enhancement leads to an improved rating 39

Local currency agency enhanced bonds • • • Diversification of funding and credit base Local currency agency enhanced bonds • • • Diversification of funding and credit base Long tenor upto 10 year door to door Matches project periods with debt maturities Stable capital structure and forex risk is a contingent risk Increased visibility / profile in local bond market Various categories of investors may offer “tenor buckets”, the issue could be structured with tranches of varying maturities. ( “STRIPS” ) • Secured by charge on fixed assets and colaterals such as Pledge of shares etc. 40

Factors to be considered • Macro economic stability: interest, inflation and exchange rate • Factors to be considered • Macro economic stability: interest, inflation and exchange rate • Capital markets liquidity and distribution of securities • Pricing bench marks: Deep and liquid Govt bonds can act as fundamentals for corporate bonds as they provide low risk pricing bench marks. • Legal and infrastructural frame work such as securities law, bankruptcy process, settlement process. • Size of government local bond issuance and avaliability of local credit rating agencies 41

Transaction cost calculation 42 Transaction cost calculation 42

43 43

44 44

Secured premium notes Instrument details * Face value -Rs. 300/- to be fully called Secured premium notes Instrument details * Face value -Rs. 300/- to be fully called in 12 to 18 months from allotment. * An attached warrant which will entitle the holder of the warrant to get one equity share of Rs. 10/- at a premium of Rs. 70/-. * An SPN holder is not entitled to interest for three years. the first * The face value of each SPN will be redeemed over 4 instalments of Rs. 150 each ( Rs. 75/- as principal repayment and Rs. 75/-asadditionalsumtowardsinterest 45 & redemption premium).

Analysis OPTION I : SPN holder does not exercise the warrant Year 1 2 Analysis OPTION I : SPN holder does not exercise the warrant Year 1 2 Outflow 3 4 5 6 7 (150) Inflow Cap. repayment 75 75 Redemption premium 18. 75 Cap. gains tax @20% (3. 75) Interest 56. 25 Tax on int @30% (16. 875)(16. 875) Net flow IRR 75 75 18. 75 (3. 75) 56. 25 (150) 129. 375 129. 875 = 15. 10% (pretax) / 11. 66 % (post tax 46 )

OPTION II : SPN holder exercises the warrant and sells the shares or sells OPTION II : SPN holder exercises the warrant and sells the shares or sells off the warrant year 5 6 150 150 (post tax) 129 IRR = 24. 41% pretax 21. 81% post tax 129 outflow 1 150 inflow(pretax) 2 3 4 150 35. 5 47

Company cash flows Year 1 2 3 4 5 6 Inflow Cap repayment 75 Company cash flows Year 1 2 3 4 5 6 Inflow Cap repayment 75 75 Redn. premium 18. 75 Interest 56. 25 Tax shield 37. 5 7 150 37. 5 Outflow Net flow 150 37. 5 150 (112. 5)(112. 5) Cost of capital (post tax) = 8. 25% 48

Sale proceeds to investors (value of Tisco share ) Less warrant premium Net proceeds Sale proceeds to investors (value of Tisco share ) Less warrant premium Net proceeds Outflow of 2 nd call Net flow Rs. 194. 50 Rs. 80. 00 -------Rs. 114. 00 -------Rs. 150. -------(35. 50) 49

Warrants Warrant - a call option from a company permitting the debenture holder to Warrants Warrant - a call option from a company permitting the debenture holder to buy a certain no. of shares at a specified price. Characteristics of warrants to Exercise price Exercise ratio Expiration date Detachability * Investor receives fixed interest return and capital gains due shares * Lower coupon rate could be offered by companies. * Excersing of a warrant has dilution effect 50

* Cash inflow in future upon excersing of warrants * Direct relation between coupon * Cash inflow in future upon excersing of warrants * Direct relation between coupon rate of debt instrument and warrant terms. * Acts as a sweetener for debt. * Deferred equity financing * Promoter holding can be improved. * Khoka buy back options could be provided. 51

Exchangeables • Optional convertible debenture gets converted into equity shares of another company. . Exchangeables • Optional convertible debenture gets converted into equity shares of another company. . • Conversion price will always be higher than current market price of the other company since investor has a dual stream of return. • Reduces cost of borrowing for issuer of exchangeable and tax efficient in case the equity shares of the other company are held by him in his portfolio. • Investor who does not opt for conversion will get exchangeable redeemed by the issuer. • Ideal for companies which are highly levered and have high interest costs. • Exchangeables are linked to emerging / growth stocks 52

Derivative linked Bonds • Under lying derivative could be Metal price on LME • Derivative linked Bonds • Under lying derivative could be Metal price on LME • Minimum & Maximum off take gurantee • Cap & Collar on derived price • Helps in reducing risk for balance financing if minimum off take qty at collar price ensures breakeven • Non recourse balance sheet financing • Ensures forward sale of commodity 53

Due diligence procedures. BACKGROUND • . Where and when was the Company incorporated and Due diligence procedures. BACKGROUND • . Where and when was the Company incorporated and by whom? Details of its current business locations. • . The current corporate structure of the Company and the changes it has undergone over the years. • Brief history of the Company from its incorporation until the present day including the date of listing of the Company’s shares and any business landmarks including it’s subsidiaries. 54

. STRATEGIC PLANS • . Description of the planning process in the Company. • . STRATEGIC PLANS • . Description of the planning process in the Company. • . What are the Company’s strategic growth objectives? Details of any new projects, new businesses or changes in the Company’s business that is under way or planned (including the proposed expansion and any proposed acquisitions/ mergers or joint ventures). • . Any recent significant developments including new products, contracts, customers or transactions. • . Estimates of growth for the Company, including assumptions used. • . Details of any significant disposals or cessation of business in recent years. And the Company’s plans for re-organisation of its business, if 55 any.

 • Details of the proposed uses of capital from this offering. After the • Details of the proposed uses of capital from this offering. After the offering, will the Company have adequate capital for its intended growth? Does the Company have any future financing plans? • . Any material changes that may occur in the next several years in its key market(s) and how is the Company positioned to deal with these changes? • The major factors affecting the Company’s business over the last three years (such as wage rises, exchange rate movements, market changes etc. ) How well is the Company positioned to hedge against the effects of a recession or adverse business conditions – international and domestic? 56

PRODUCTS • Details pertaining to the major products and services of the Company including PRODUCTS • Details pertaining to the major products and services of the Company including information on the following: • . Breakdown of sales and profits by major products/ services for the last five years. • . Breakdown of sales between outside customers and related entities Principal customers/ customer segment with revenue estimates • . Details of marketing and promotion of products/ services with estimates of expenditure. • . Details of collaborations, patents, licenses, etc. • . Breakdown of domestic Vs. export revenues and earnings. Also the percentage of the revenues and earnings derived from exports. 57

 • Analysis of historical and projected breakdown of costs for major products. • • Analysis of historical and projected breakdown of costs for major products. • Analysis of recent reports about the Company, its constituent entities, or its products, either produced by the Company or a third party (e. g. market research done by the Company or an industry association). 58

BUSINESS & MARKETING STRATEGY. Analysis of major political, demographic, economic, seasonal and environmental factors BUSINESS & MARKETING STRATEGY. Analysis of major political, demographic, economic, seasonal and environmental factors that impact the business prospects • . Relative change in valuation of the rupee Vis-à-Vis the export currency • . Indian interest rates and availability of financing • . Growth of the Indian economy Analysis of operating and financial measures the Company has adopted or plans to adopt for minimizing the impact of the above on its business prospects and profitability. • . Quantification of the impact of these factors on the Company’s profitability. • . Analysis of the recent trends in the Company’s sales and profitability. Is there any element of seasonality in the revenue of the Company? • . Analysis of the Company’s marketing strategy for major products, and major markets and customer groups. 59

 • Anticipated changes in the Company’ product mix over the next several years. • Anticipated changes in the Company’ product mix over the next several years. What are the factors that will drive these changes? • . Analysis of the Company’s long term goals with respect to performance benchmarks such as market share, revenue, profitability and growth for its major products. • . Analysis of the major vulnerabilities of the Company’s long term goals and strategies (e. g. capacity constraints, technology or product constraints, quality control, profit margin etc. ) • . Analysis of the current regulatory framework governing the industry; and anticipated major changes in the same and how would it impact the Company? 60

CUSTOMER & DISTRIBUTION NETWORK. Analysis of the sales and distribution strategies employed by the CUSTOMER & DISTRIBUTION NETWORK. Analysis of the sales and distribution strategies employed by the Company. For each major product category or group, analyse the following: • . Total number of Company-owned outlets/ dealers • . Total number of independent outlets/ dealers • . Nature of contractual arrangements governing the outlets, dealerships and supporting facilities. • . Effectiveness in terms of size, efficiency, geographical coverage and other appropriate dimensions of the distribution strategies employed by the Company relative to those of its competitors. • . Evaluate the consistency of the Company’s distribution strategies with its long-term product and business objectives. 61

COMPETITION Analysis of what the management sees as the major customer market segments for COMPETITION Analysis of what the management sees as the major customer market segments for the products of the Company. . Evaluate the Company’s competitive position with respect to major products, including; • . A list of competitors • . Analysis of the Company’s strengths and weaknesses relative to its competitive (e. g. pricing, product quality, reputation etc. ) • . A profile of the market share position attained by the Company in its major products and also that of its major competitors 62

. MANUFACTURING Details regarding the manufacturing processes employed by the Company for its major . MANUFACTURING Details regarding the manufacturing processes employed by the Company for its major products. . Details of any proprietary technologies or processes used by the Company and the agreements and licenses governing their use. . Analysis of the condition of the manufacturing facilities and equipment, including: • Description of each facility, including plant and equipment, product lines, total production capacity, current utilisation, number of employees, operational shifts etc. • Age of product line and machinery • Efficiency of manufacturing facilities relative to leading competitors • . Historical schedule of major capital expenditures or expansion 63 • . Details of planned capital expenditure or expansions

RAW MATERIAL & ENERGY SOURCES • Details of raw materials used in the Company’s RAW MATERIAL & ENERGY SOURCES • Details of raw materials used in the Company’s major manufacturing activities. • . Identification of the primary sources of raw material • . Details of major suppliers of raw materials and describe the nature of relationships with them. • . Nature of existing purchase agreements. • . Difficulty of replacing or adding new sources of raw materials. • . Volatility of raw material prices and supply. • How many raw material inventories does the Company keep on 64

. MANAGEMENT • Details of the names and titles of directors and key senior . MANAGEMENT • Details of the names and titles of directors and key senior executives. • . How seriously will the Company’s operations be impaired if any individual member of senior management was not avaliable to carry out his responsibilities? • . Analyse management contracts, if any. • . Details of any profit sharing, bonus, pension or stock purchase arrangements or plans for management and other employees. 65

. FINANCE • . Analyse recent and expected financial results. With specific refrence to . FINANCE • . Analyse recent and expected financial results. With specific refrence to the following : • . Sensitivity of profits to prices • . Sensitivity of profits to volumes • . Any anticipated changes in fixed costs • . Financial Projections for the Company and each of its operating divisions. • Details regarding the company’s share capital: . • Classes of shares and number of shares outstanding for each class • . Names of major shareholders and their holdings • . Relationship of major shareholders to each other and to the officers and directors of the Company • . Details of any voting agreements among shareholders 66

 • Details of the Company’s outstanding loans and other debts, including mortgages, lease • Details of the Company’s outstanding loans and other debts, including mortgages, lease agreements and lines of credit. • . Company’s policy on its debt to equity ratio? What is the availability of equity and loan capital? Are there any contractual restrictions on future secured/ unsecured financing? Does the Company intend to refinance existing borrowings? • . Are there any loans or other credit arrangements currently under renegotiation/ renewal? If so, what are the Company’s expectations on the outcome of these negotiations? • . How does the level of the Company’s debt compare with industry norms? 67

 • . What is the sensitivity of the Company’s operations to changes in • . What is the sensitivity of the Company’s operations to changes in inflation, interest rates and tax rates? • . Does the Company possess any easily realizable assets or unused credit facilities? • . Have any financial guarantees or indemnities been given to third parties to secure credit? • Information on capital commitments and contingent liabilities. • . Analyse the Company’s dividend policy. • Analysis of share price movements over the last three years (highs and lows per quarter) 68

. ACCOUNTING • . What is the status of the Company’s relationship with the . ACCOUNTING • . What is the status of the Company’s relationship with the tax authorities? Are there any major disputes in relation to tax claims? • Analyse the audited financial statements and notes thereto for the last five years. Please include divisional information, if available. • . What are the Company’s revenue recognition policies for its major revenue categories? • . How do the Company’s accounting policies compare with those of other companies in the same industry on such matters as revenue recognition, accounting for stock, valuation of investments, depreciation, accounting for research and development, allocation of expenses and overheads as between sectors of activity? 69

 • . What is the reason for and effect of past and any • . What is the reason for and effect of past and any intended changes in accounting policies? • . What is the policy with regard to pricing on intra group transactions? • Analyse the Company’s accounts receivable position, including aging of accounts by customer, amount due, time past due, reasons for non-collection (i. e. bad debt or Company oversight). • . How often does the Company conduct physical inventory checks? Historically, have there been significant differences between book records and physical counts? • . What is the Company’s depreciation policy for its principal product categories? • Details of the Company’s internal control system. In the Company’s opinion, are there any particular weaknesses that need to be addressed? 70

CAPITAL EXPENDITURE • Details of plant and equipment proposed to be added and proposed CAPITAL EXPENDITURE • Details of plant and equipment proposed to be added and proposed suppliers. • Details of the Company’s capital expenditure over the last five years and the Company’s current capital expenditure projects. • Details of plans to expand capacity, included expected timetable, financing etc. by each major division and by major asset category for the next five years. Have any contracts been entered into regarding the expansion of plants? • . Are there any new product areas/ major acquisitions or project envisaged? What projects are currently under way and what projects have recently been completed for the operational improvement and technological development of the Company’s activities? What 71 financing plan is proposed for the capital expenditure to be incurred on

. REGULATORY & LEGAL ISSUES • . Has any officer, director or major shareholder . REGULATORY & LEGAL ISSUES • . Has any officer, director or major shareholder had any difficulties of any nature with any securities regulation body in India or in another country? • Details on all litigation and pending litigation in which the Company and any of its divisions are involved or may be involved in and the potential material impact, if any, on the Company’s financial position and ability to do business. • Analyse the Company’s environment policy and discuss the Company’s compliance with environmental controls imposed by the Government. Has there been any recent change in policy? Is the Company aware of any proposed changes? • . What does the Company see as material changes that may occur in 72 the regulatory environment that can materially impact its operation. .

STAFF & LABOUR RELATIONS • . Information on the total number of employees, both STAFF & LABOUR RELATIONS • . Information on the total number of employees, both full time and part time, by major category and major operating division. Please provide details of where the Company’s main employees are situated. Does the number of employees fluctuate seasonally? Are there significant reductions or additions planned? • . Analyse union representation, if any and existing labor contracts. Are there any employment agreements due for renewal? Does the Company have any contingent plans (including reaction time to severance payments) for a recession? • Details of the Company’s wages scales. How many hours a week do full time and part time employees typically work? What is the trend in wages and other benefits for the Company compared to other 73 companies in the same industry?

. • Has the Company had major wage increases in the past year? If . • Has the Company had major wage increases in the past year? If so, what is the effect on an annual basis above that shown for the previous fiscal year? Does the Company foresee any significant wage increases in the near future, whether dictated by law, union, contracts or Company policy? Can the Company pass any increases through to customers? • Analyse the state of labor relations, including past strikes if any, handling of grievances, etc. Has the Company experienced difficulties in hiring qualified personnel? Has the Company experienced problems with employee turnover? . • . Details of the Company’s investment plan in social welfare, medical assistance, education, sickness and housing benefits. Please specify the cost of the plan in terms of revenues. • Details of pension and retirement plans for employees. What is the policy with regard to pension funding? Are there any unfunded pension liabilities? • . Does the Company provide training for its employees? 74

. RISKS & OTHER ISSUES Confirm that the Company has adequate insurance coverage on . RISKS & OTHER ISSUES Confirm that the Company has adequate insurance coverage on key assets and facilities. Details of any major risks to which the Company is or may be exposed in the future that has not been addressed in the above sections. 75