Take This Quiz & Predict Your Score in the coming CA CS or CMA Exam!
INTERNAL RE STRUCTURING AND CASE STUDY
Means:
Examine the present structure of the group businesses
vLegal- Company, WoS, LLP
vFinancial:- leveraging, flexibility of financing, expansion, Promotor group shareholding and Family Succession
vTax optimization including transfer pricing regulations
vFuture plan:- IPO, JV, alliance and exit
vCommercial:- Synergies, focused management , risk and return profile, cost optimization and unlocking value
vReturn to shareholders:-Dividend and Buy Back
Case Study:- Godrej Group
Recently, Godrej Group consolidated Godrej Industries Limited’s (GIL) interest in Godrej Vikhroli Properties LLP (GVP LLP) (a joint venture entity of Godrej Properties Limited and Godrej Industries Limited) with the Godrej Properties Limited (GPL).
Godrej Vikhroli Properties LLP is incorporated in 2011, a limited liability partnership between GPL and GIL to develop an integrated township project known as ‘The Trees’ consisting of residential and commercial developments, planned over approximately 34 acres of land in Vikhroli to be build in 3 phases. GPL has 60% share in the LLP while GIL’s share is 40%.
| GIL | GPL |
| India’s leading manufacturer of oleo chemicals and makes more than a hundred chemicals for use in over two dozen industries. | vReal estate development arm of the Godrej Group.vIt is a subsidiary of Godrej Industries Limited. |
Godrej Vikhroli Properties LLP is incorporated in 2011, a limited liability partnership between GPL and GIL to develop an integrated township project known as ‘The Trees’ consisting of residential and commercial developments, planned over approximately 34 acres of land in Vikhroli to be build in 3 phases. GPL has 60% share in the LLP while GIL’s share is 40%.
The restructuring steps as follows:
Step 1:– GIL to formed a Special Purpose Vehicle (SPV) GIL Vikhroli Real Estate Limited (GVREL) as a wholly owned subsidiary of GIL.
Step 2:- GVREL will enter as partner in GVP-LLP with 40% share and simultaneously GIL will retire itself from GVL-LLP.
Step 3:– GVREL will get merged with GPL.
GIL formed Special Purpose Vehicle (SPV) – GIL Vikhroli Real Estate Limited and then this to be merged in GPL. There can be 2 main reasons for doing so:-
Transaction should be Tax Neutral for GIL:-
If GIL would have sold its 40% stake in GVP LLP directly to GPL, it would resulted in tax implication on GIL’s part.
| Particular | Amount (In Crore) |
| Total Consideration | 437.06 |
| Cost | 146.28 |
| LTCG @ 20% | ~58.15 |
| Net Cash received by GIL | 378.91 |
Cash outflow from GPL
Direct purchase of stake would have led to cash outflow of around 437.06 crore to GPL.
Only GPL will receive cash and no other shareholders.
At CAKART www.cakart.in you will get everything that you need to be successful in your CA CS CMA exam – India’s best faculty video classes (online or in pen drive) most popular books of best authors (ebooks hard copies) best scanners and all exam related information and notifications.Visit www.cakart.in and chat with our counsellors any time. We are happy to help you make successful in your exams.
.
www.cakart.in.
Click Here to download FREE CA CS CMA Text Books.
