Case Study – Business Restructuring 11 October 2013

1. Case Study – Business Restructuring 11 October 2013

2. Case Study - Background and objectives Co X • Company X (‘Co X’), an Indian private limited company is engaged in two lines of businesses • IT Services - Business A • Real estate - Business B • Co X holds 100% shares in Company Y (‘Co Y’), an Indian private limited company, currently engaged in small businesses including similar to Business A • Co X is contemplating a strategic partnership or sale of entire business or at least Business A • Subsequently, Co X is approached by an interested party - Company Z (‘Co Z’), an Indian private limited company engaged in the business of IT Services Options evaluated • Slump sale of Business A by Co X to Co Y followed by demerger of Business A to Co Z • Merger with retrospective appointed date of Co X and Co Z Business A Business B 100% Co Y Co Z IT Services

3. Option 1 – Slump sale followed by demerger Step 1 Co X Co Z Mechanics • Co X to transfer Business A to Co Y vide slump sale for a consideration of INR 1000 (‘fair value’) • INR 50 is paid in cash to Co X and balance would entail creation of a payable in the books of Co Y to Co X. • Once buyer Co Z is identified, Business A to be demerged into Co Z vide a High Court Approved Process. • Consideration for demerger by issuance of Redeemable Preference Shares to Co X • May be redeemed at a subsequent stage • Payable of INR 950 to transfer from Co Z to Co X • To be settled by payment in cash by Co Z post demerger Business A Business B IT Services Slump Sale Cash + Creation of payable 100% Co Y Step 2 Issue of redeemable preference shares Co X Co Z Business B IT Services 100% Demerger Co Y Business A

4. Option 1 – Slump sale followed by demerger Step 1 Co X Co Z Key considerations • Tax implications on slump sale of Business A from Co X to Co Y? • Cost step up on assets of Business A? • Tax neutrality of demerger of Business A from Co Y to Co Z? • Sufficient time gap between slump sale and demerger and commercial substance • Time consuming option since High Court process involved • CCI and Stamp Duty implications to be considered Business A Business B IT Services Slump Sale Cash + Creation of payable 100% Co Y Step 2 Issue of redeemable preference shares Co X Co Z Business B IT Services 100% Demerger Co Y Business A

5. Option 2 – Merger with retrospective appointed date Merger Co X Co Z Mechanics • Once buyer Co Z is identified, Co X to merge into Co Z vide a High Court approved Scheme of Amalgamation. Co Z to issue shares to shareholders of Co X as consideration. • Retrospective Appointed date for merger, say, 1 April 2011 Key considerations • Tax implications on merger? • Option helpful in the event Co X is incurring tax losses • Issuance of preference shares vis-à-vis equity share as consideration • Transferability on MAT Credit on merger • Commercial Viability of owning Business B by Co Z • Time consuming option since High Court process involved • CCI and Stamp Duty implications to be considered Business A Business B IT Services 100% Co Y Resultant Structure post merger Co Z IT Services Business A Business B 100% Co Y

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