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GOVERNMENT
OF INDIA
MINISTRY
OF FINANCE
ENGAGEMENT
OF ADVISORS FOR DISINVESTMENT IN MARUTI UDYOG LIMITED (MUL) THROUGH SALE TO
PUBLIC SECTOR FINANCIAL INSTITUTIONS (INCLUDING PUBLIC SECTOR BANKS)
1.
Introduction
1.1
Maruti Udyog Limited (MUL)
is a manufacturing company in the automobile sector. The paid-up capital of the
company as on 31.03.2005 is Rs. 144.46 crore (consisting of 28,89,10,060 equity
shares of the face value of Rs.5 each). The Government of India holds 18.28%
equity of the company, Suzuki Motor Corporation (SMC) holds 54.21% and the FIIs
/ Indian Financial Institutions / public hold the balance. The shares of the
company are listed on stock exchanges in India.
2.
Government decision
2.1
The Government of India (GOI) intends to disinvest equity shares to the
extent of 8% of MUL’s equity, through sale to public sector Financial
Institutions (including public sector banks). Expressions of Interest are
invited, by 17.30 Hrs. (IST) 3rd October 2005, from reputed merchant
bankers/investment bankers, either singly or as a consortium, with specific
expertise in disinvestment through capital market offerings, to act as Advisors
and assist and advise the Government in the sale process.
3.
Responsibilities of the Advisors
3.1
The Advisors would be required, inter alia, to undertake tasks related to
all aspects of the offering, including but not restricted to: -
(i)
Advising
the Government on the timings and the modalities of the sale process.
(ii)
Ensuring
best returns to the Government, structuring of sale transaction thereof.
(iii)
Advise
and assist the Government in identification and selection of specific advisors
(if required) such as legal advisors, accountants, other intermediaries and
coordinate their work under the guidance of the Government, complete
due-diligence, draft offer documents etc. for the issue.
(iv)
Pre-market
survey, road shows and generation of interest amongst prospective investors, as
may be necessary.
(v)
Undertaking
market research along with pricing and allocation of shares and after sale
support.
(vi)
Guide
and facilitate in obtaining necessary approvals, completion of regulatory
requirements.
(vii)
Performing
all other responsibilities connected with such offerings.
(viii)
Undertaking
the task of printing and distribution of stationery as may be required in this
sale process and to ensure that the required stationery is printed in sufficient
quantity and delivered to the required centers, well in advance.
3.2
The Government desires to have two Advisors, having adequate experience in
capital market offerings, and the Government would select two parties who
together would form a team and will be called Advisors.
4.1
Reputed merchant bankers/investment bankers with adequate and specific
expertise in disinvestment are invited to submit Expressions of Interest either
singly or as a consortium for selection as Advisors to Shri V.P. Gupta, Under
Secretary, Department of Disinvestment, Room No.209, II Floor, Block No.11, CGO
Complex, New Delhi-110 003. The bidders would be required to deposit along
with the Expression of Interest, a non-refundable earnest fee of INR 40,000 by
way of a demand draft drawn in favour of ‘Pay and Accounts Officer,
Ministry of Finance, Department of Disinvestment, New Delhi’ payable at Delhi.
GOI reserves the sole right to accept or reject any or all Expressions of
Interest without assigning any reasons thereof.
Together with the Expression of Interest, the following details are to be
sent:
(A)
Background of the firm:-
(i) Full
particulars of the constitution, ownership and main business activities of the
prospective Advisors. In case of consortium bids, the particulars of the
coordinating firm having the principal responsibility for the mandate, as well
as those of other partners, may be furnished.
(ii)
Unabridged
Annual Reports or audited financial accounts for the last three years of all the
partners.
(iii)
Details
of the pending litigation and contingent liabilities, if any, that could affect
the performance of the bidder under the mandate, as also details of any past
conviction and pending litigation against sponsors/partners, Directors etc., and
any areas of possible conflicts of interest.
(iv) Details of Domestic issues managed as Lead Manager/Book Runner or
Co-Lead Manager/Co-Book Runner, in respect of issue size of more than Rs.100
crore are to be furnished in the format given in Annexure-I.
(B)
Understanding
of the Company
Details
of understanding and SWOT analysis of MUL may be furnished.
(C)
Experience
and presence in India
A
brief note evidencing the prospective Advisors strength in India indicating the
number and addresses of offices, manpower and investment, if any, in the Indian
capital market as follows:
(a)
Commitment to India, indicating net investment in Indian capital market
(b)
The quality and quantity of presence in India with specific reference to
research team
(c)
Number and places of offices with address, manpower with the investment
banking team.
(D)
Broad Scheme for the issue
a)
Optimal syndicate structure suggested to maximize quality and quantity of
demand.
b)
Proposal on syndicate incentivisation.
c)
Strategy for pre-marketing.
d)
Proposed Road Show venues and reasons for suggesting the same.
e)
Commitment(s) which may act either as a constraint or as a conflict of
interest to your involvement in the proposed issue
(E)
Manpower
commitment
Details
of team who will be handling the proposed issue, their status in the
organization, their background, qualification, experience and present addresses.
An undertaking may also be given that if during the process, any of the
team members is not available by way of resignation, etc. another person of the
same qualification and experience would be made available after informing the
Department of Disinvestment.
(F)
Marketing
and Demand Analysis
Details
of the following should be furnished:
a)
Equity sales and distribution capacity with demonstrated capability of
selling Indian issues along with distribution network.
b)
Demand analysis as projected and details of sectors influencing demand.
c)
Strategy for marketing shares and identification of target investors.
d)
Identification of key selling points.
e)
Strategy for structuring the sale in a manner which would maximize the
sale proceeds for Government, in compliance with Company Law, other applicable
laws, SEBI Rules/Guidelines.
(G)
Valuation
Methodology
Details of the valuation
methodology to be followed in determining the final pricing of the issue.
(H)
Quality
of Research
Research
strength in the country, sector, region, world based on rating as
established by independent global surveys.
Details should be given relating to research capabilities and experience
and background of the research team.
(I)
After-market support
Strength
in lending after market support, with specific reference to Indian issues
managed in the past.
(J)
Time Schedule
A
realistic time schedule for launching the proposed Domestic issue with complete
break up of activities to be undertaken by various agencies involved in the
issue.
4.2
All the information sought above, and any other additional information
considered necessary by the bidder, should be sent, in 3 copies, maximum of 10
pages (font size 12) to the officer mentioned in para 4.1 as a part of the
Expression of Interest (EOI).
5.
Eligibility
5.1
Bidders
should have handled domestic equity issues of issue size of more than Rs.100
crore.
5.2
Government of India has issued additional guidelines prescribing certain
qualifications for Advisors for disinvestment process. A copy of the guidelines
(OM No. 6/4/2001-DD-II dated 13th July, 2001) is enclosed (Annexure-II).
The interested parties are requested to carefully go through the guidelines and
after satisfying that they are qualified to act as Advisors, furnish the
following certificate as a part of the proposal/EOI.
“We
certify that there has been no conviction by a Court of Law or
indictment/adverse order by a regulatory authority for a grave offence against
us or any of our sister concern. It is further certified that there is no
investigation pending against us or our sister concern or the CEO,
Directors/Managers / Employees of our concern or of our sister concern. It is
certified that no conflict of interest exists as on date and if in future such a
conflict of interest arises we will intimate the Government of India of the
same.”
6.
Presentation
6.1
Qualified interested parties would be required to make a presentation of
their credentials and the proposed transaction, before an Inter-Ministerial
Group (IMG) at New Delhi in the Committee Room of Ministry of Disinvestment,
Room No.515, Block No.14, CGO Complex, New Delhi-110003.
The exact date and time of the presentation will be intimated separately.
The parties will be assessed broadly on the following criteria:
a)
Experience and capabilities in handling similar transactions as Advisors.
b)
Sector expertise and experience.
c)
Understanding of MUL.
d)
Deal team qualification and manpower commitment to the deal.
e)
Marketing strategy and after market support. (Strategy for structuring
the sale process/ allocation of shares to ensure maximum proceeds for the
Government in the sale process)
f)
Local presence and level of commitment to India.
g)
Global presence and distribution capabilities.
h)
Research capabilities.
6.2
Immediately after their presentation is over, the parties are required to
hand over a sealed envelope containing the fee quotes mentioned in para 7 below
to the Convener of the Inter-Ministerial-Group. The fee quoted should be
unconditional and inclusive of all taxes.
7.
Fee
7.1
The Advisors will need to quote a fee, in a sealed envelope, as a
percentage of disinvestment proceeds through sale to public sector Financial
Institutions (including public sector banks). The
fees should also include the expenses for the printing and distribution of the
stationery as defined in para 3.1 (viii) above.
The fee quoted should be unconditional and inclusive of all taxes.
A drop dead fee if any, (in lump sum and inclusive of all taxes) payable
in case Government abandons the offering at any stage after the process has been
started by the Advisors, may also be indicated separately, if so desired.
7.2
The bid should be unconditional. Expenditure on account of fees to
legal/accounting or any other consultant appointed by GOI, should not be
included in the financial bid. Expenses of Road Shows, conferences and travel,
boarding and lodging, only of Government officials will be borne by the
Government. The Advisors will,
however, pay the travel related expenses and all the other expenses including
those related to their due diligence, their road show expenses and pre-marketing
expenses in connection with the offerings, expenses of legal counsels,
accountants and other experts appointed by them for communication and for
preparation of offering circular and prospectus, etc. The Advisors will be
liable to pay taxes for their professional services as per laws of the land.
8. Procedure
for Selection of the Advisors
8.1
Based on the Expression of Interest received from the interested parties,
Government would request them to make a presentation before an Inter-Ministerial
Group (IMG) constituted by Government.
8.2
The IMG would evaluate the parties based on their presentation and
shortlist them for the purpose of opening their financial bids.
The L1 party would be selected for the transaction and the L2 party would
be required to match the fees quoted by L1. In case L2 does not accept the
offer, Government will make the offer to L3 and the process will continue till
Government appoints two advisors.
8.3
The two Advisors selected by Government would work as a team and both the
selected Advisors would be called Advisors. The two Advisors would share the
L1 quoted fees, equally.
9.1
If any further clarification is needed about the assignment, the
under-mentioned officer may be contacted.
Shri
V.P. Gupta
Under
Secretary
Ministry
of Finance
Department
of Disinvestment
Room
No. 209
II
Floor, Block No.11
CGO
Complex, Lodi Road
New
Delhi - 110 003
Tel.
011-24368036
Fax
011-2436 6524
e-mail:
vp_gupta@hub.nic.in
Annexure-I
Details
of Domestic Issues
(Value Rs. in Crore)
|
Parameters
|
2001 No.
of Mandates and Value |
2002
No.
of Mandates and Value |
2003
No.
of Mandates and Value |
2004
No.
of Mandates and Value |
2005
No.
of Mandates and value |
Total
|
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INDIAN
ISSUES
(a)
Equity (b)
Debt Issues |
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|
Issues
pulled out/withdrawn pre or post road shows |
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Note:
Please indicate if you are engaged in any ongoing market transaction in
the automobile sector.
No.
6/4/2001-DD-II
Government
of India
Department
of Disinvestment
Block
14, CGO Complex
New
Delhi.
Dated
13th July 2001.
OFFICE
MEMORANDUM
Subject:
Guidelines for qualification of Advisors for disinvestment process
Government
has examined the issue of framing comprehensive and transparent guidelines
defining the criteria for selection of Advisors, so that the parties selected
through competitive bidding inspire public confidence.
Earlier, a set of criteria like sector experience, knowledge, commitment
etc. used to be prescribed. Based on experience and in consultation with
concerned departments, Government has decided to prescribe the following
additional criteria for the qualification/disqualification of the parties to act
as Advisors to the Government for the disinvestment transactions:
(a)
Any
conviction by a Court of Law or indictment / adverse order by a regulatory
authority for a grave offence against the Advising concern or its sister concern
would constitute a disqualification. Grave
offence would be defined to be of such a nature that it outrages the moral sense
of the community. The decision in
regard to the nature of offence would be taken on a case-to-case basis after
considering the facts of the case and relevant legal principles by the
Government. Similarly, the decision
in regard to the relationship between the sister concerns would be taken, based
on relevant facts and after examining whether the two concerns are substantially
controlled by the same person/persons.
(b)
In
case such a disqualification takes place, after the entity has already been appointed
as Advisor, the party would be under an obligation to withdraw voluntarily from
the disinvestment process, failing which the Government would have the liberty
to terminate the appointment / contract.
(c)
Disqualification
shall continue for a period that Government deems appropriate.
(d)
Any
entity, which is disqualified from participating in the disinvestment process,
would not be allowed to remain associated with it or get associated merely
because it has preferred an appeal against the order based on which it has been
disqualified. The mere pendency of
appeal will have no effect on the disqualification.
(e)
The
disqualification criteria would come into effect immediately and would apply to
all the Advisors already appointed by the Government for various disinvestment
transactions, which have not yet been completed.
(f) Before disqualifying a concern, a Show Cause Notice why
it should not disqualified would be issued to it and it would be given an
opportunity to explain its position.
(g)
Henceforth, these criteria will be prescribed in the advertisements seeking
Expressions of Interest (EOI) from the interested parties to act as Advisor.
Further, the interested parties shall be required to provide with their
EOI an undertaking to the effect that no investigation by a regulatory authority
is pending against them. In case
any investigation is pending against the concern or its sister concern or
against the CEO or any of its Directors/Managers/Employees, full details of such
investigation including the name of the investigating agency, the charge/offence
for which the investigation has been launched, name and designation of persons
against whom the investigation has been launched and other relevant information
should be disclosed, to the satisfaction of the Government. For other criteria
also, similar undertaking will be obtained along with EOI. They would also have to give an undertaking that if they are
disqualified as per the prescribed criteria, at any time before the transaction
is completed, they would be required to inform the Government of the same and
voluntarily withdraw from the assignment.
(h)
The interested parties would also be required to give an undertaking that there
exists no conflict of interest as on the date of their appointment as Advisors
in handling of the transaction and that, in future, if such a conflict of
interest arises, the Advisor would immediately intimate the Government of the
same. For disinvestment proposes,
‘conflict of interest’ is defined to include engaging in any activity or
business by the Advisor in association with any third Party, during the
engagement, which would or may be reasonably expected to, directly or
indirectly, materially adversely affect the interest of Government of India or
the Company (being disinvested) in relation to the transaction, and in respect
of which the Advisor has or may obtain any proprietary or confidential
information during the engagement, that, if known to any other client of the
Advisor, could be used in any manner by such client to the material disadvantage
of Government of India or the Company (being disinvested) in the transaction.
The conflict of interest would be deemed to have arisen if any Advisor
firm/concern, has any professional or commercial relationship with any bidding
firm / concern for the same disinvestment transaction during the pendency of
such transaction. In this context,
both Advisor firm and bidding firm would mean the distinct and separate legal
entities and would not include their sister concern, group concern or affiliates
etc. The professional or commercial
relationship is defined to include acting on behalf of the bidder or undertaking
any assignment for the bidder of any nature, whether or not directly related to
disinvestment transaction.
(i)
On receiving information on conflict of interest, the Government would
give the option to the Advisor to either eliminate the conflict of interest
within a stipulated time or withdraw from the transaction and the Advisor would
be required to act accordingly, failing which Government would have the liberty
to terminate the appointment/contract.
Sd/-
(A.K.
Tewari)
Under Secretary to the Government of India
