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INTERNAL RE STRUCTURING AND CASE STUDY

 

 

 

INTERNAL RE STRUCTURING AND CASE STUDY

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%.

 

GILGPL
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 Consideration437.06
Cost146.28
LTCG @ 20%~58.15
Net Cash received by GIL378.91

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.

 

 

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