BSE plans platform for listing startups, easy access to capital

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Leading stock exchange BSE has set up an advisory group to suggest ways to develop BSE Hi-Tech, a platform to help startups list and access capital from sophisticated investors in the securities market. The 13-panel group, which held its first meeting, includes experts from the start-up ecosystem, investors, merchant bankers and legal professionals who will advise BSE on the newly proposed framework on BSE Hi-Tech, which will be based on the new institutional trading platform norms announced by regulator SEBI in August 2015.

Nasscom’s Ravi Gururaj, Khaitan & Co partner Rajiv Khaitan, Tie executive director Naveen Raju and Accel Partners partner Shekhar Kirani, are among the members in the group. “In order to develop BSE Hi-Tech, a platform where young fast growing companies can list and access capital from sophisticated investors, the Exchange has decided to form an advisory group,” the BSE said in a statement.

The group is mandated to interact with various stakeholders including the government, Sebi and industry associations and support in framing policies for the creation of a robust platform. “Deliberations and suggestions will be forwarded to the regulator for their consideration,” the exchange added.

In recent years, the Indian startup ecosystem has witnessed tremendous growth and has come into its own driven by factors such as massive funding, consolidation activities, evolving technology and a burgeoning domestic market. These entrepreneurs need a platform to reach out to potential investors and raise funds to fuel growth.

Source: http://yourstory.com/2015/12/bse-startup-listing/

Foreign inflow boost for alternative investment funds

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The move by the Reserve Bank of India (RBI) to allow foreign investment into alternative investment funds (AIFs) through the automatic route is likely to boost inflows.

 

In a notification on Thursday, the central bank said those residing outside India (including a registered foreign portfolio investor or a non-resident Indian) might acquire, purchase, hold, sell or transfer units of an AIF. Downstream investment by an AIF shall not be regarded as foreign investment if the sponsor or the manager or the investment manager is ‘owned and controlled’ by Indian.

 

“The notification paves the way for foreign money to come into AIFs without the Foreign Investment Planning Board (FIPB)’s intervention and be treated as domestic capital, subject to conditions. This could lead to a fresh surge of foreign flows in Indian listed and unlisted securities,” said Tejesh Chitlangi, partner, IC Legal.

 

Earlier, every foreign investment proposal in AIFs had to be cleared by FIPB. In some cases, foreign investments would suffer due to the sectoral limits being hit.

 

Importantly, the amendment provides that downstream investments by such investment vehicles, sponsored or managed by Indian-owned and controlled entities, will be treated as domestic investment. With this, investment vehicles so sponsored or managed will be free to invest in all sectors, without any of the sectoral restrictions imposed under the Foreign Direct Investment rules.

Foreign inflow boost for alternative investment funds

 

“Overall, this is an extremely positive development and it is hoped that this is followed with suitable tweaks to the tax laws to address certain vexed issues surrounding these investment vehicles,” added Kalpesh Maroo, partner, BMR and Associates LLP.

 

However, there is one caveat that could be a hindrance. RBI has said this easing of foreign investment won’t be applicable for limited liability partnerships (LLPs), as it would be difficult to determine the Indian sponsors in such structures. And, 60 per cent of the assets in AIFs are sponsored through LLPs.

 

“There is a caveat in the regulations that the Securities and Exchange Board of India (Sebi) is the regulator to determine the sponsor of these investment pooling instruments. We will approach Sebi for checking on the Indian nationality of the sponsors,” said a legal expert, requesting anonymity. Sectoral sources say close to 200 AIFs operate out of India.

 

Source: http://www.business-standard.com/article/markets/foreign-investment-boost-for-alternate-investment-vehicles-115112000837_1.html

SEBI cuts IPO paperwork drastically

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From December 1, companies filing for a public issue of securities (IPO/FPO and the like) have to come out with abridged prospectus containing all material and appropriate information on the issue to enable informed decision-making by investors.

Amending its public issue regulations, equities and commodities market regulator SEBI said the abridged prospectus should consist of five sheets of paper printed on both sides in A4 size booklet form.

SEBI has mandated that information given in tabular format should not be repeated in text format in the abridged prospectus. The abridged prospectus would also contain the application form in a manner by which tearing off the application form would not mutilate the prospectus, SEBI said.

Generic information not specific to the issuer shall be brought out in the form of a General Information Document, said SEBI.

Govt approves 16 FDI proposals worth Rs 4,722 cr

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The government has cleared 16 foreign investment proposals, including that of HDFC Capital and Ageon Religare Life Insurance Company, amounting to Rs 4,722 crore.
The investment proposals were approved following the recommendation for the same by the Foreign Investment Promotion Board (FIPB), headed by economic affairs secretary Shaktikanta Das.
“The government has approved 16 proposals of foreign direct investment amounting to Rs 4,722 crore,” the finance ministry said in a statement.
However, it rejected 8 proposals including that of Cipla Health Limited and Apollo Hospitals Enterprise Limited.
The Board cleared proposal of HDFC Capital Advisors Limited which alone entails investments of Rs 2,400 crore.
The company sought approval for issue of units to Green Light, it said.
“HDFC Fund proposes to make investments in equity, equity linked instruments, redeemable preference shares, non-convertible debentures and other debt securities of listed or unlisted investee companies engaged in real estate construction development projects which are permitted under the SEBI AIF Regulations as a Category II AIF,” it said.
Besides, Ageon Religare Life Insurance’s proposal worth Rs 559.96 crore was cleared by FIPB.
The approval was sought for the transfer of shares to Aegon India Holding thereby raising the foreign shareholding from 26 percent to 49 percent.
Among others, Sun Pharma Research Advanced Company Ltd’s proposal worth Rs 250 crore, Synergia Life Sciences Pvt Ltd (Rs 40 crore) and the post facto approval for Aditya Birla Nuvo’s Rs 377 crore plan were cleared during a meeting held on 29 September.

SEBI introduces uniform format of Listing Agreement for listed companies

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SEBI introduces uniform format of Listing Agreement for listed companies

Markets regulator SEBI today issued uniform listing agreement format incorporating the revised disclosure and regulatory requirements applicable for all listed entities.

The new listing regulations allow listed companies to seek shareholders’ approval for related party deals through ordinary resolutions.

Besides, SEBI’s provisions for listed entities have been aligned with those of the Companies Act, 2013.

CIRCULAR Note: The Securities and Exchange Board of India has issued a circular no. CIR/CFD/CMD/6/2015 dated 13th October, 2015 to provide a uniform format of the listing agreement for the listed companies. A listing agreement is the agreement which is required to be executed with the stock exchange where the securities of the company are listed.

CIRCULAR

CIR/CFD/CMD/6/2015                                                        October 13, 2015

To

All Listed Entities
All the Recognised Stock Exchanges

Dear Sir/Madam,

Sub: Format of uniform Listing Agreement

  1. The requirement of executing a listing agreement with the Stock Exchange is specified under different regulations related with initial issuance of capital, the details of which are as under:

Type of Securities, Regulation, Regulation No.

  1. Specified Securities (Equity & Convertible Securities on Main Board or SME or ITP) or Indian Depository Receipts, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“ICDR”), Regulation 109
  2. Non-Convertible Debt Securities Securities, and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (“ILDS”), Regulation 19A
  3. Non-Convertible Redeemable Preference Shares, Securities and Exchange Board of India(Issue and Listing of NonConvertible Redeemable Preference Shares) Regulations, 2013 (“NCRPS”), Regulation 16A
  4. Securitised Debt Instruments, Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 (“SDI”), Regulation 35A
  5. Mutual Funds, Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 (“MF”), Regulation 31B
  1. In order to give effect to the requirements of Regulations mentioned at para 1 above, a simplified listing agreement which is uniform across all types of securities/listed entities is being specified under Annexure I.
  2. A listed entity which has previously entered into agreement(s) with a recognised Stock Exchange(s) to list its securities shall execute a fresh listing agreement with such Stock Exchange within six months of the date of notification of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) i.e. September 2, 2015.

Notwithstanding such novation, any action taken or purported to have been done or taken by the Stock Exchanges or SEBI, any enquiry or investigation commenced or showcause notice issued in respect of the existing listing agreement shall be deemed to have been done or taken under the corresponding provisions of the Listing Regulations in force.

  1. This circular is issued in exercise of the powers conferred under sections 11(1) and 11A of the Securities and Exchange Board of India Act 1992.
  2. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and listing”, “Mutual Funds”, “Corporate Debt Market” “Continuous Disclosure Requirements”.

Yours faithfully,

Harini Balaji
General Manager
+91-22-26449372
harinib@sebi.gov.in

Valuation of Business under DCF Method

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Valuation of Business under DCF Method

Valuation of enterprise is a complex assessment of the intrinsic value of a business enterprise, based on the strength of historic performance, present value and the future potential taking various factors in to account. Hence, the valuation of a business enterprise is both an art and a science. There are broadly three approaches to valuation, namely, Net Asset Approach, Income Approach and Market Approach.

First one is based on Net Assets of the enterprise, viz., the value of the Total Assets as per the Audited Balance Sheet less the Total Liabilities.

Second one is based on the income of the enterprise, viz., EBITDA (Earnings Before Interest, Depreciation and Amortization).

Third one is the market approach, factoring both of the above and the Discounted Cash Flow (DCF) of future earning potential of the business enterprise.

DCF method is recommended as the most appropriate method for valuation of most business enterprises, including start-ups and RBI acknowledges internationally accepted pricing methodology for valuation of shares. SEBI and other bodies also recognize the DCF method as acceptable method of valuation. An illustrative report of valuation on the basis of the DCF Method is given below for the information of the readers.

Valuation of Business of ATL Networks Limited

Background Information:

ATL Networks Limited is a leading telecom infrastructure and service provider with world class path breaking Optic Fiber Technology FTTH (Fiber-to-the-home). ATL Fiber Network offers the High speed Internet access and plethora of services. ATL Networks offers the most advanced technology of delivering the Internet at unbeatable prices.

Valuation Analysis Date:

As represented by the Management, we have taken note of the developments that have happened between Financial Years 2013-14 and 2014-15 and till May 15, 2015, which may have significant impact on the valuation of the entity. Hence, for the focus of valuation of our analysis, we have considered the valuation date to be 23 May 2015. The Management of ATL Networks Limited have provided us the Historical Financials till March 2015 and the provisional till May 15, 2015 and the Projected Consolidated Financials from 2015-16 for the next 10 years.

Valuation Analysis Methodology:

For the purpose of Valuation of business entity, we have used the guidelines as per the Accounting Standards and the latest amended pricing guidelines under the Foreign Exchange Management Act, Regulations issued by Reserve Bank of India as on May 4th 2010.

The Valuation Method suggested by these latest amended guidelines for valuation of business of an unlisted Company is Discounted Cash Flow method.

Discounted Cash Flow Method (DCF):

“The DCF method uses the Future Free Cash Flows of the Company (FFCFC) or equity holders discounted by Cost of Capital/Cost of Equity respectively to arrive at the present value. In General, the DCF method is strong and widely accepted valuation tool, as it concentrates on cash generation potential of a business.

Valuation Analysis:

As per the FEMA Regulations, we have considered the DCF method for valuation of ATL Networks Limited.

The Future Free Cash Flows to the Company, FFCFC have been calculated based on the financial projections for the period from 2015 to 2025 as provided by the Management. Based on the discussions, we understand that a heavy capital expenditure would be required in the initial years and the revenue will be dependent on the initial capacity building. The Company will break even only after 18 months.

The future growth percentage is promising based on market penetration solely in the Telecom Industry, in particular the growth in the broadband connections. Hence, the growth in the domestic market & competition in the domestic market alone is factored in the above valuation analysis.

Discounting Factor:

The Discounting Factor considered for arriving at the present value of free cash flows to the company is weighted average cost of capital. The cost of debt is post tax interest cost for debt and cost of equity is calculated based on Capital Asset Pricing Model (CAPM). We have considered domestic comparable companies to calculate the Beta utilized in the CAPM model to estimate the Cost of Equity.

Valuation of ATL Networks Limited using DCF method:

Under DCF Method, the sum of Present Value of Free Cash Flows of the entity in the explicit period is arrived at in Annexure – A. ATL Networks Limited, being an unlisted company and a company of moderate size, a liquidity discount and size of discount of 10% has been applied to derive the fair value of future earnings / cash flows.

Based on the method discussed above and subject to the assumptions and limitations stated separately in the annexure to the report and in our engagement letter, we have calculated the valuation of the business entity under the DCF Method of Valuation.

Sources of information

The valuation analysis is based on a review of the documentation provided by the Management. The sources of information include:

  1. Foreign Exchange Management Regulations 2000
  2. Audited consolidated financials for the period up to 31.03. 2015
  3. Provisional financial statement of the company as on 15.05.2015
  4. Projected financials received from the client for the 10 years from 2015-16
  5. Other industry related information from the World Wide Web and various publicly available sources, etc.
  6. Discussions with the Management of ATL Networks Limited
  7. Information from financial publications on Telecom industries, some of which are listed below.

 

http://articles.economictimes.indiatimes.com/2014-11-10/news/55955622_1_digital-india-broadband-growth-google-india

http://www.nextbigwhat.com/broadband-penetration-in-india-in-2012-297/

http://www.ibef.org/industry/telecommunications.aspx

http://www.trai.gov.in/WriteReadData/ConsultationPaper/Document/4.pdf

Caveats

Provision of valuation recommendations and considerations of issues described herein are the areas of our regular corporate advisory practice. The services do not represent accounting, audit and financial due diligence review, consulting, transfer pricing or domestic tax related services that may otherwise be provided by us as Chartered Accountants. We have relied on explanation and information provided by the management and accepted their information provided to us as accurate. Although we have reviewed such data for consistency and reasonableness, we have not independently investigated or otherwise verified the data provided. Therefore, we assume no liability for the accuracy of the data. The valuation analysis recommendation contain herein is not intended to represent the value at anytime other than the date of this report. We have no present or planned future interest in either the company or its subsidiaries if any, and the fee for this report is not contingent upon the value reported herein. Our valuation analysis should not be construed as investment advice, specifically we do not express any opinion on the suitability or other wise of entering into this consolidation of business transaction.

Distribution of report:

The valuation analysis is confidential and has been prepared exclusively for the management of ATL Networks Limited for Company Law requirements in India. It should not be used, reproduced or circulated in whole or in part, without the consent of the undersigned to any other person and any other purpose other than mentioned earlier in this report.

 

Sd/-

For Sundar.K. F.C.A., A.C.S.,

Chartered Accountants