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Presented by ca swatantra singh

Presented By

CA Swatantra Singh,

B.Com , FCA, MBA Email ID: [email protected]

New Delhi , 9811322785,,

Mergers acquisitions

Mergers & Acquisitions

Current Scenario and Way Ahead



  • Takeover of Ashok leyland by Hindujas

  • Chabbria group took over Falcon tyres

  • Ceat tyres taken over by Goenkas

  • Pepsi & Coke taking over Parle and Indian soft drink companies

  • Take over of Tetley by Tata Tea.

  • Grasim acquired UltraTech through a Swap

  • Tata Motors’ acquisition of Daewoo

  • Jindal Vijaynagar steel merged Euro Iron & steel, Euro energy and JSW Power

  • ITC, Somani group through BIFR.

  • Recently Vijay Malaya took over Shaw Wallace

Why m a

Why M & A

  • Horizontal growth for enlarged markets & optimum utilization

  • Vertical combination to economize cost and reduce tax burden

  • Diversification of Business

  • Combination of management, financial and human resources. Synergies

  • Improve dividend yield, earnings, book value of entities and cash flow of the entities.

  • Attraction to foreign investors

  • Financial Restructuring and

  • Tax Planning



  • Blending of two or more existing undertakings: “Amalgamation”

  • Sale of business

    - As a going concern – “Slump Sale”

    - Individual assets - “Itemised sale”

  • Merger / Amalgamation of existing business – “Merger”

  • Sell to a subsidiary – “Subsidiarisation”

  • Demerger

  • Secondary market / negotiated purchase of shares – “Share Purchase”

  • Issue of fresh shares (preferential issue) – “Fresh Issue”.

Current scenario

Current Scenario

  • Revival in deal activity in the country

  • More than double the transactions in first five months as compared to same period last year

  • Rebound linked to recovery of Indian and global economy

  • Active sectors – Telecom, Pharma, Cement, FMCG


Mergers acquisitions1

Mergers & Acquisitions…


Mergers acquisitions2

…Mergers & Acquisitions…

Top 5 M&A Deals - 2009

Top 5 M&A Deals - 2008


Mergers acquisitions3

…Mergers & Acquisitions…


Mergers acquisitions4

…Mergers & Acquisitions


Private equity

Private Equity…


Private equity1

…Private Equity…

Top 5 PE Deals - 2009

Top 5 PE Deals - 2008


Private equity2

…Private Equity…


Private equity3

…Private Equity


Positive trends

Positive Trends…

  • Market in favour of consolidation

    • Higher degree of homogeneity across markets due to globalization – Marginal costs of set up in new markets

    • Brand identity recognizable across markets

    • Market dynamics favour fewer players – economies of size and scale

    • Recent examples – Bharti – Zain, GTL Tower deal


Positive trends1

…Positive Trends…

  • Flexibility and pragmatism demonstrated by Indian Promoters

    • Promoters recognise strengths and weaknesses and willing to adapt

    • No stigma attached to alienation of stake in companies

    • Ability to gauge time to encash vs carry on

    • Recent examples – Ranbaxy, Piramal, Wockhardt, Tata Docomo


Positive trends2

…Positive Trends…

  • Availability of credible information

    • Reliable standards of accounting – transition to IFRS

    • Higher levels of transparency and corporate governance

  • Breadth and depth in the financial sector

    • Increase in number of players in the financial intermediary market

    • Emergence of investor classes with different risk appetites

      • Angel investors, VC, PE, FIIs, Domestic cos, Foreign cos, Retail investors


Positive trends3

…Positive Trends

  • Certainty in regulatory framework

    • Clarity in tax provisions relating to slump sale

    • Incorporation of M&A provisions in direct and indirect taxes




  • Positive trends yet to achieve full potential

    • Greater flexibility to be shown by Indian promoters

    • Need for consolidation not fully recognized

  • Grey areas in regulatory framework

    • Lack of clarity on stamp duty liability

    • 80IA provisions not conducive to mergers and acquisitions




  • Restrictive foreign exchange controls and listing norms

    • Direct listing of Indian shares on foreign exchanges not allowed

    • Indian companies not allowed to merge with foreign companies

    • Foreigners individually not permitted to invest in Indian shares

    • Restricts usage of Indian shares as currency for deals

  • Increasing protectionism

    • Governments keen on retaining national identity of iconic companies

    • Increasing use of capital controls to regulate flow of foreign capital




  • Accounting for M&A under IFRS

    • Appointed date of merger vs actual date of merger

    • Purchase method of accounting – valuation of intangibles and off balance sheet items and residuary goodwill

      • Marked departure from Indian GAAP – no comparability pre and post IFRS

    • Capital Reserve vs Credit to P&L A/c – MAT impact

    • Demergers to be treated as non-cash dividend – change in accounting for transferor

    • IFRS to apply to top 50 companies – different norms applicable to different companies at same time




  • Certain shortcomings in IFRS to be addressed

    • Few norms contribute to volatility and subjectivity in fin statements

    • Accounting for FCCBs

    • Lease Equalization vs Inflation

    • Fair degree of subjectivity in fair valuation norms




  • Regulations to encourage cross border M&A

    • Indian companies to be allowed to merge with foreign companies

    • Capital controls to be lifted on the Indian rupee

    • Listing on foreign exchanges to be allowed and vice versa

    • Permit accounting and reporting in functional currency




  • Rationalization of tax provisions

    • Tax liability only on encashment - not on exchange or conversion

    • Tax benefits to continue in case of mergers

    • Clarity on treatment of depreciation post transaction

    • Introduction of group relief

    • Introduction of anti-abuse provisions like CFC and thin capitalization rules

      • As opposed to current anti-abuse norms prescribed in DTC




  • Better protection of minority rights in corporate law

    • Strengthen norms on independent directors and corp governance

    • Suitable amendments in listing agreement

    • Provisions to eliminate conflicts of interest in cases where management also holds majority shares


Presented by ca swatantra singh

Corporate Restructuring -- Necessity

  • Companies worldwide are refocusing, downsizing andmerging to become globally competitive.

  • Developing core competence for global / domestic competition, technological development through collaboration and joint venture

  • Divesting non profitable business

Crystal clear

Crystal Clear

Presented by ca swatantra singh







Demerger /

Spin off


Sale as a

going concern-





Presented by ca swatantra singh


Shareholder X

Shareholder Y

Shareholders X & Y

Company X Ltd..

Company Y Ltd..

Company XY Ltd.

Cement Unit

Cement Unit

Cement Unit

  • Merger of one or more company into another or merger of companies to form another company provided

    • 75% in value of the shareholders of amalgamating company must become shareholders of the amalgamated company (Sec 2(1B))

  • Amalgamation - Direct tax neutralized

  • No income to amalgamating company/shareholders on the transfer of business undertaking/receipt of income. (Sec 47(vi))

  • Depreciation to amalgamated company on the basis of tax w.d.v in the hands of the amalgamating company (Explanation 7 to Sec 43)

  • Accumulated losses and unabsorbed depreciation of amalgamating company can be carried forward by the amalgamated company if specified conditions are fulfilled. (Sec 72A)

Tax consequences on companies

Tax Consequences On Companies

  • Income/ Loss transferred w.e.f Appointed date

  • Capital Gains:

    • To TransferorNIL

    • To ShareholdersNIL

  • Depreciation basis for:

    • Transferee Existing w.d.v

    • TransferorRemaining w.d.v

    • QuantumProrated

Tax consequences contd

Tax Consequences…..Contd

  • Tax incentives of undertaking Continue

  • Subsequent ExpenditureAllowed

  • Holding Period benefit

    • For Asset TransferredContinue1/4/81 Option

    • For resulting sharesContinue

  • B/f - carried forward

    • Depreciation Allowed

    • LossAllowed

  • Cessation of liabilityTaxed

  • Expenses on processDeductible

Amalgamation issues

Amalgamation.. .Issues

  • ¾ shareholding criteria to be applied in respect of shares held as on Appointed date or Effective date?

  • 43B payment by amalgamated Company

  • Credit in respect of MAT paid by amalgamating Company

  • Depreciation on cost or WDV 43(1) vs 43(6)

  • Whether succession to business

  • Transaction between holding & subsidiary in the intervening period

    • Dividend distribution tax paid

Tax implications c f and set off of losses u s 72a

Tax implications……c/f and set off of losses u/s 72A

  • Conditions prescribed: For Amalgamating Co.

    • Has been engaged in business in which accumulated losses occurred/depreciation remained unabsorbed for 3 or more years

    • Has held continuously as on date of Amalgamation 3/4 of book value of fixed assets held by it 2 years prior to date of Amalgamation

  • For Amalgamated Co:

    • Holds continuously for 5 years 3/4 of book value of fixed assets of Amalgamating co.

    • Continues business of Amalgamating co. for 5 years

    • Fulfill conditions prescribed under Rule 9C

Presented by ca swatantra singh

Tax implications……conditions under Rule 9C in case of Amalgamation

Conditions prescribed under Rule 9C

  • Amalgamated Co. to achieve production level of 50% of installed capacity of undertaking of Amalgamating Co. before end of 4 yrs & continue to achieve it till the end of 5 yrs

  • Amalgamated Co. to furnish a CA report to AO in Form No. 62 along with ROI for AY in which above condition is satisfied and for subsequent AY falling within 5 yr period

Presented by ca swatantra singh


Public - 60%

Promoter - 40%

Public - 60%

Promoter - 40%


Company (DC)


Cement Unit

Cement Unit

Steel Unit

Steel Unit

  • Transfer of business undertaking as a going concern by one company (DC) to another company (RC) pursuant to a court Scheme subject to fulfillment of following conditions (Section 2(19AA))

    • All properties and liabilities of the business undertaking are transferred at book values;

    • Shares of the RC are issued to the shareholders of the DC on a proportionate basis;

    • Shareholders holding not less than 75% in value of the shares of the DC become shareholders of the RC;

Presented by ca swatantra singh

Demerger ...

  • Demerger - Direct tax neutral for company/shareholder.

  • No income to DC on transfer of undertaking (Section 47(vib))

  • No income to shareholder on receipt of shares in RC (Section 47(vid))

  • Proportionate depreciation in the year of demerger. Depreciation to RC on the basis of tax W.D.V. in the hands of DC.[explanation to Section 43(1)]

  • Accumulated business losses and unabsorbed depreciation (Section 72A):-

    • directly relatable to the demerged undertaking - allowed to be carried forward by RC

    • not directly relatable to the demerged undertaking - to be apportioned in the ratio of assets transferred to RC and assets retained by DC

  • Demerged business undertaking eligible for most tax exemption - benefits available even as part of RC (deduction u/s 80IA, 80IB available for unexpired period to resulting Co.)

Demerger issues

Demerger.. .Issues

  • ¾ shareholding criteria to be applied in respect of shares held as on Appointed date or Effective date?

  • Transactions between holding & subsidiary Company during ‘Appointed date’ & ‘Effective date’?

    • Dividend declared - DDT

  • 43B payment by resulting Company

  • Whether succession to business

  • What happens if conditions for demerger are not satisfied

Demerger tax consequences if conditions of demerger not satisfied

Demerger.. .Tax consequences if conditions of demerger not satisfied

  • Capital gain to transferor / shareholder

  • Deemed dividend to shareholder – dividend distribution tax

  • Section 72A not applicable

  • Depreciation to transferee on consideration paid

  • Cost of shares issued to shareholders of demerging company

Presented by ca swatantra singh


Promoter - 40%

Public - 60%

Promoter - 40%

Public - 60%

Company X Ltd..

Company X Ltd.

Cement Unit

Cement Unit

Steel Unit

New Company Y Ltd..

Steel Unit

  • Transfer of undertaking to WOS for a consideration

  • Direct Tax - Transaction is tax neutral subject to a lock-in period. (Section 47A )

  • No capital gains to the holding company (Section 47(iv))

  • Depreciation to subsidiary on the basis of the written down value

  • for the holding company (Explanation 6 to section 43)

  • Two layers of Dividend distribution tax

Presented by ca swatantra singh

Slump Sale

Promoter - 40%

Public - 60%

Promoter - 40%

Public - 60%

Y Ltd..

Company X Ltd..

Company X Ltd..

Cement Unit

Steel Unit

Cement Unit

Steel Unit

  • Transfer of business undertaking as a going concern for lump sum consideration without values being assigned to individual assets and liabilities.(Section 2(42C)

  • Transferor Company

  • Transferor Company liable to short/long term capital gains (holding period 36 months)(Section 50B)

    • Capital gains computed by deducting ‘net worth’ from the sale consideration

  • Step up of Depreciation - possible as transferee entitled to depreciation on the cost of assets.(Section 32 & 72) – Valuation of assets required

Slump sale issues

Slump sale.. .Issues

  • Contingent consideration – tax implications to purchaser/seller

  • Negative net worth – capital gain?

  • Depreciation to purchaser on cost – impact of 5th proviso to section 32

  • Tax liabilities of predecessor – Sec 170

  • Approval u/s 281 – practical difficulty

Presented by ca swatantra singh

Stock Sale

  • Liable to long term capital gains depending on the period of holding (holding period 12 months)

  • In case of shares listed on a recognised stock exchange in India

    • Subject to securities transaction tax instead of Capital gains tax

    • Deduction under section 88E of STT available if income under ‘PGBP' includes any income from taxable securities transactions

Stock sale issues

Stock Sale.. .Issues

  • Interest deduction of acquisition cost

  • Tax liabilities of predecessor – Sec 170

  • Approval u/s 281 – practical difficulty


Presented by ca swatantra singh

Itemized Sale

  • Sale on the basis of value being assigned to a separate item.

  • Transferor liable to short/long term capital gains depending on the nature of asset & period of holding

  • Depreciable asset-Short term capital gain

  • Non depreciable assets

    • For stock-Long term if held for a period > 12 months

    • For others-Long term if held > 36 months

  • Depreciation to transferee on cost – opportunity to claim step up depreciation

Itemized sale issues

Itemized sale.. .Issues

  • 47A – No step up when holding Co. pays tax

  • Tax liabilities of predecessor – Sec 170

  • Approval u/s 281 – practical difficulty



  • Legal Aspects:

    • Companies Act, 1956

    • MRTP Act

    • Industrial Development & regulation Act

    • Sick Industrial (special provisions) Act

    • SEBI Regulations

  • Finance Aspect:

    • Synergy

    • Valuation of firm – DCF / APV

  • Taxation Aspect: I.T.Act, 1961

  • Accounting Aspect: AS 14

  • Procedural Aspects – Scheme of Amalgamation

Legal aspects i

Legal Aspects I

  • Companies Act, 1956: Sections 391 to 396

    • An application to be made to the court along with

      scheme of amalgamation, company’s final accounts.

    • Court has powers to supervise and modify the

      structuring of the scheme. Court can order a meeting of

      shareholders, members as it deems fit.

    • If a ¾ majority of such a meeting consents and the

      scheme is sanctioned by court, file it with registrar.

    • Court can order for merger of 2 cos. In public interest

    • In case of court merger, the transferor co. will be

      dissolved without winding up whereas in acquisition, the

      transferor co. continues to exist.

  • MRTP Now Competition Act:

    • Power retained with the government to order discontinue or restructuring of such combination agreement as would obtain dominant position.

Legal aspects ii

legal Aspects II

  • Industrial (Development And Regulation Act):

    • High court can order to appoint anyone to takeover the management of the entity for running or restarting.

    • License of the amalgamating co. shall automatically be transferred to amalgamated co.

  • Sick Industrial (Special Provisions) Act:

    • Not applicable to non-industrial co.and small scale or ancillary undertaking.

    • Section 18 empowers BIFR to sanction the merger of a sick co. with another co. & vice versa considering the employee’s views.

  • SEBI:

    • Regulation 3 of SEBI regulations provides for the non applicability of takeover provisions to Amalgamations effected u/s 391 to 394 of companies act and Sick Industrial units u/s 18

Finance aspect returns cost

Finance Aspect… Returns>cost

  • Synergy is the economic value of benefits arising out of Amalgamation.

    Synergy = VAB –(VA + VB)Hence, it signify the difference between combined value and individual values of entities.

  • Synergy can be a vital but a sole determinant of Amalgamation. Post merger integration, managerial talent can result in abnormal returns.

  • Valuation of the transferor entity can be done by DCF Methodology i.e. discounting the estimated future cash flows of entity (less) value of debt and other obligations as estimated.

  • An alternative approach to value target co. can be APV:

    • Value the company as if it were financed entirely with equity.

    • Estimate the value of financing side effects like tax shields etc

    • Add the two to arrive at APV.

Taxation matters

Taxation Matters

  • Transferor Company can claim Capital gains exemption u/s 47(vi)

  • WDV of depreciable assets of transferor co. as on the appointed day to be added to the respective block of transferor co. Other Assets can be taken at actual cost – Expl (2) to Section 43(6)( C).

  • Depreciation claim to be split up between both cos. as per number of days

  • Only accumulated business loss & unabsorbed depreciation can be transferred. Capital loss to lapse. Transferee co. should be an Industrial undertaking, Shipping Company, Hotel or a Bank to claim benefits.

  • Tax benefits u/s 10A,10B,80IA,80IB shall be available continuously.

  • Amalgamation expenses can be claimed as deduction equally over 5 years period.

  • No transfer for shareholders of transferor Co. hence no tax liability. Period for which shares are held in transferor co. to be considered for indexation.

Presented by ca swatantra singh

Tax issues Mapped

  • For Transferor

  • Carry forward of loss / depreciation

  • Capital gains tax.

  • Transfer pricing.

  • Tax avoidance device

  • Business closure

  • Diversion of income at source.

  • Depreciation.

  • Tax impact of alternate funding.

  • Staggered consideration.

  • Capital receipt.

  • Chapter XXC - Allocation of common assets / liabilities.

Presented by ca swatantra singh

Tax issues Mapped

  • For Transferee

  • Carry forward of loss

  • Production / asset holding criteria.

  • Depreciation on tangible / intangibles.

  • Tax credit under MAT.

  • Deduction for 43B liabilities.

  • Deduction for liabilities of predecessor / remission of liabilities.

  • Cost of acquisition / fair market value.

  • Continuity of tax exemptions / deductions.

  • Restatement of value.

  • Succession of business.

Presented by ca swatantra singh

Tax issues Mapped

  • For Shareholders

  • Deemed dividend

  • Capital gain / loss

  • Consideration in kind / staggered consideration.

  • Short term / long term capital assets

  • Cost of acquisition

  • Transfer pricing

  • Treaty protection

  • Foreign tax credit

  • Underlying tax credit

  • Tax sparing on exempt income

  • Tax avoidance

Presented by ca swatantra singh

Long term tax Objectives

  • Reduce Dividend distribution tax

  • Opportunities to utilize losses.

  • Step up of tax depreciation base.

  • Reduced administrative cost.

  • Transfer pricing asymmetry.

  • Flexibility of allocating common expenses.

  • Impact on quantification of tax incentives.

  • Possibility of depreciation on intangibles

  • Mitigation of minimum alternate tax.

  • Impact on tax incentive of change in holding / migration of business.

  • Tax optimization by alternate funding methods.

As 14 accounting interpretations

AS 14 : Accounting Interpretations

  • Applicable for Amalgamation as defined in Companies Act, 1956. Not applicable for other ways of reconstruction, takeover.

  • AS 14 to be followed only for accounting in books of transferee co. For transferor Co. has to be as per common principles.

  • Consideration includes shares, securities, cash and other assets by means of which obligation is discharged.

  • Amalgamation in nature of merger: Pooling of Interest

    • All Assets and liabilities of transferor taken over by transferee Co.

    • Consideration paid in equity shares except for fractional shares

    • Business of transferor co. to be carried on by transferee Co.

    • Shareholders of at least 90% or more in the transferor Co. to become shareholders in transferee co.

    • The Assets and Liabilities to be taken over at book values without making any adjustments by way of revaluation or otherwise.

  • Amalgamation in nature of purchase: Purchase method

    • If any of the conditions regarding amalgamation in nature of merger is not satisfied.

Accounting methods

Pooling of interest

In the Financial statements post Amalgamation, line by line addition of all assets and liabilities of all entities except share capital.

Any Excess realised / loss suffered to be adjusted by reserves.

For statutory reserves open Amalgamation adjustment a/c.

Amortize goodwill arising out of such events over 5 years.

Purchase Method

Assets and liabilities to be recorded in the books at the value at which they are taken over by the transferee co.

Any surplus over net assets to be debited to goodwill and loss suffered to be credited to capital reserve.

Reserves and surplus shall not be transferred to the purchasing co.

Treatment of statutory reserves and goodwill shall remain same as in pooling of interest method.

Accounting Methods

Scheme of amalgamation or merger

Scheme of Amalgamation or Merger

  • No prescribed format for a scheme and is designed to suit terms and conditions relevant to proposal

  • Provision for vesting the assets and liabilities of transferor co. should be clearly defined. If transferee co. does not want to takeover any item, should mention it specifically.

  • Define the effective date from which the scheme is intended to come into operation.

  • Valuation of the shares to decide the exchange ratio. The method has to be appropriate and acceptable to majority.

  • Position of employees has to be clearly set out with a specific mention of transfer of employees at same terms and conditions.

  • The application for merger can be made by the company, members, creditors or liquidator.

Acquisitions and takeovers

Acquisitions and Takeovers

  • It is the purchase of one of the business as a going concern / acquisition of controlling interest in it in a friendly or a hostile way.

  • Takeover by reverse bid wherein a smaller co. gains control of a larger co.

  • Buy out is the acquisition by incumbent management of the business where they are employed. Full buy out is still a concept popular in OECD countries.

  • Direct negotiations / acquisitions of shares are the most common ways of takeover in India

  • No one shall acquire shares/voting rights of entitlements of over 15% without Public Announcement as prescribed by SEBI.

  • Guidelines for takeovers are embodied in clause 40B of the Listing Agreement of SEBI

  • Tax shield for unabsorbed losses and depreciation u/s 72A can be exploited through Acquisitions

Presented by ca swatantra singh

  • Accounting Implications

  • Valuations

  • Share Exchange Ratio

Accounting implications

Accounting Implications

  • Accounting Standard 14-

    - Pooling of interest method

    - Purchase method

Accounting implications1

Accounting implications

  • Amalgamation – Accounting

    - conflict of accounting policies

    - uniform set of accounting policies

    - Change in accounting policies reported in accordance with AS-5

Accounting implications2

Accounting implications

  • Treatment of Reserves

    - merger accounting -identity of Reserves

    - purchase accounting - net assets value – consideration

    = reserve

    (Statutory reserve to be preserved)

    - Treatment of goodwill

    - implication of AS-26 Intangible asset

    - Balance in Profit & Loss A/c

Accounting implications3

Accounting Implications

  • Disclosure

    (a) particulars of amalgamating companies

    (b) effective date of amalgamation for accounting purpose

    (c) method of accounting (pooling vs purchase)

    (d) particulars of the Scheme

    (e) description and number of shares issued

    (f) exchange

    (g) treatment of difference

Valuation and determination of share exchange ratio

Valuation and determination of Share Exchange ratio

  • Valuations

    - CA Valuations

    - Merchants Bankers Review

    - No two valuations are likely to be identical

    - fairness

    - a matter of opinion



  • Book value method – net assets method

  • Market value method

  • Profit earning capacity method OR yield method

    future maintainable profits

    DCF method

  • Appropriate weightage

  • Average of the three methods



Who can object to Valuation

  • Members

  • Creditors

  • ROC

  • Employees

Share ratio

Share Ratio

  • Share Exchange Ratio

    - in the case of amalgamation

  • Share entitlement Ratio

    - in the case of demerger/arrangement

  • Reduction of share face value in transferor Co. and issue of shares for the reduced value in transferee co.

Share ratio1

Share Ratio

  • Court not to interfere with share exchange ratio

  • Public interest

  • Movement in market price during the intervening period not material

  • Share exchange in the case of holding and subsidiary co amalgamation

  • Extinguishment of intercompany shareholding

  • Trust holding

  • Method of valuation and resultant share ratio to be mentioned in explanatory statement

Share ratio2

Share Ratio

  • No necessity that equity to be exchanged for equity

  • Equity can be exchanged for preference shares as option to shareholders

  • Shares to be live during the intervening period from appointed date to record date (after effective date)



  • No specific accounting standard

  • AS 14 by and large applies

  • Valuation on the basis of identifiable business

  • Share entitlement ratio

  • Shares of demerging Co. not to be extinguished

Amalgamation accounting an illustration

Amalgamation Accounting – an Illustration

  • Hind lever Chemicals Ltd. (HLC) with Tata Chemicals Ltd (TCL)

  • HLC – bulk chemicals & fertilizers

  • TCL - Chemicals & fertilizers

  • Scheme operative from 01-April-02

  • Bombay High Court sanctioned TCL scheme on 14-Oct-03

  • Punjab & Haryana High Court sanctioned HLC scheme on 19-May04

  • Effect given in 2003-04 accounts of TCL

Illustration merger of hlc with tcl

Illustration - Merger of HLC with TCL

  • Notes to the Balance Sheet & P&L account of TCL 31.03.04

    6) Scheme of Amalgamation

    (a) understanding of HLC has been transferred to and vested into TCL retrospectively from 1st April 2002 (the appointed date). The Scheme has been given effect to in these accounts. The effective date of amalgamation is 01-06-04

    (b) the operations of HCL include manufacturing and trading in fertilizers and Bulk Chemicals

    (c) pooling of interests –method as prescribed by AS 14

Illustration merger of hlc with tcl1

Illustration - Merger of HLC with TCL

Rs CrRs Cr

Fixed Assets 166.33

Investments 3.43

Net Current Assets 217.84

Total Assets 387.60

Less Loans62.46

Deferred tax liability21.36(83.82)


Illustration merger of hlc with tcl2

Illustration - Merger of HLC with TCL


  • Issue of shares 34464000 Equity Shares 34.46

    in the ratio of TCL for every two HLC

    Transfer of Share premium HLC to Share premium 162.73

    Transfer of CRR of HLC to CRR 0.10

    Transfer of Capital Reserve of HLC to Capital Reserve -

    Transfer of P&L A/C of HLC to P&L A/C 45.30209.13

    Balance transferred to General Reserve 60.19

Illustration merger of hlc with tcl3

Illustration - Merger of HLC with TCL

  • Shares to be issued to HLC shareholders by TCL eligible for dividend declared by TCL

  • P%L Appropriation A/C of TCL to include dividend on shares pending allotment to HLC shareholders

  • Income and expenses during the period 01-04-02 to 31-03-03 incorporated in the Accounts 2003-04 as HLC carried on the existing business in “trust” on behalf of TCL

  • All vouchers documents for the period are in the name of HLC

Illustration merger of hlc with tcl4

Illustration - Merger of HLC with TCL

  • P&L A/C 31.03.2004 Rs Cr


    Profit after tax 220.53196.58

    Balance brought forward 365.03300.53

    Amount transferred on amalgamation

    of HLC:

    Balance in P&L A/C 01.04.0245.30

    Profit after tax for 2002-0330.03


    Dividend (18.96)

    Tax on dividend (2.43)

    Transfer to General Reserve (5.00)48.94

    Amount available for appropriation634.50497.11

Illustration merger of hlc with tcl5

Illustration - Merger of HLC with TCL

  • Valuation

    valuation carried out and recommended by N.M. Raiji & Co. CA s and Delloitte Haskins & Sells CA s

    Board of Directors on the basis of their independent valuation and judgment accepts the recommendation

  • Share Exchange Ratio

    Shareholders of HLC (transferor Co.) eligible to get 5 (five) fully paid up equity shares of Rs 10 each of TCL (transferee Co.) in respect of every 2 (two) equity shares of the face value of 10 each held in HLC

    Share exchange to take place on a suitable record date

Presented by ca swatantra singh

  • Presented By

  • CA Swatantra Singh, B.Com , FCA, MBA

  • Email ID: [email protected]

    • New Delhi , 9811322785,



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