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FAQs
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Financial Restructuring
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Q. How are finance requirements typically structured at
NCMPL?
The syndication desk of NCMPL has so far worked on Debt Syndication of large Infrastructure Projects being implemented by NCMPL. The mandate includes Debt structuring of highly complex and difficult projects. Project Syndication focuses on the role of an Arranger of Project and Structured loans. While fund mobilisation services are provided across various areas, Entertainment sectors remain key focus area for syndication activity. The services under Project Syndication include project loan syndication, structured debt syndication and debt restructuring. The syndication business thrives on its extensive contact base and strong relationships developed over the years with Banks and Financial Institutions which is our forte.
At NCMPL, working capital loans are tailored to suit the precise requirements of the client, in any of the various instruments available or structured as a combination of cash credit, demand loan, bill financing and non-funded facilities.
We can gauge the credit needs of each client and frame the exact solutions.
NCMPL’s dedicated team has a deep understanding of the intricacies of various industries and is richly experienced in reckoning the business potential of companies.
These informed professionals can assess your specific credit requirements and tailor customized financial solutions to suit your risk profile and the working capital cycle of your company.
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Project Finance
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Q. What is Project Financing?
It is a method of financing very large capital intensive projects, with long gestation period, where the lenders rely on the assets created for the project as security and the cash flow generated by the project as source of funds for repaying their dues.
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Q. What are the typical characteristics of Project Financing?
Some of the typical characteristics are:
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Large capital costs |
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Long gestation periods |
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Assets are not easily transferable |
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Services provided are not tradable |
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Revenues only in local currency;
borrowing may be in foreign currency |
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Tariffs are politically sensitive |
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Social aspects involved |
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Vulnerable to regulatory policies |
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Limited recourse financing
needed
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Mergers & Acquisitions
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Q. What are Mergers?
Mergers can be classified into three categories: when two entities amalgamate and give birth to a new entity; when a relatively small and less profitable company merges with a big company; and when a relatively big and profitable company merges with a smaller company (sometimes even a loss-making company for that matter). Such a merger is known as a reserve merger.
As for the reason of merger, there can be many-diversification, growth, corporate control, synergy, cost advantages, market control or market share, breadth of product range, technological edge or control of research and development, globalisation, access to otherwise inaccessible source and markets, lower gestation period (such as in greenfield projects), managerial capability, or shareholder value, among others.
The usual form of consideration for a merger is exchange of shares of the acquiring firm with the shares of the target company. In acquisitions, the consideration may take the form of cash consideration or loan instruments such as debentures.
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Q. What laws are applicable while considering a Merger or Acquisition?
The regulatory regime governing M&A is complex and straddles several areas of law and accounting, not to mention business concerns. The restrictions on M&A transactions in India have been substantially relaxed with the liberalisation of the economy. Thus, the provisions concerning M&A under the Monopolies and Restrictive Trade Practice Act, 1969 (MRTP) and the restrictions under Foreign Exchange Regulation Act, 1973 (FERA) have been substantially removed.
In 1994, the law relating to acquisition of shares of quoted/listed companies was codified and the Securities and Exchange Board of India (SEBI) announced the Substantial Acquisition of Shares and Take Over Code (the 'code'). The code inter alia provides that if any one or more persons together acquire 10 per cent or more equity shares of a listed company, the acquirer shall make an offer to the remaining shareholders of the company to acquire their shares. The code also provides a detailed procedure to be followed and the price to be offered to the shareholders. The existing code is undergoing drastic changes and a new takeover code is expected to be notified soon.
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MRTP Act, 1969: Certain Amendments in the MRTP Act were brought about in 1991. The government has removed restrictions on the size of assets; market shares and on the requirement of prior government approval for mergers that created entities that would violate prescribed limits. The Supreme Court, in a recent judgement, decided that "prior approval of the central government for sanctioning a scheme of amalgamation is not required in view of the deletion of the relevant provision of the MRTP Act and the MRTP Commission was justified in not passing an order restraining implementation of the scheme of amalgamation of two firms in the same field of consumer
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FERA, 1973: FERA is the primary Indian law which regulates dealings in foreign exchange. Although there are no provisions in the Act which deal directly with transactions relating to amalgamations, certain provisions of the Act become relevant when shares in Indian companies are allotted to non-residents, where the undertaking sought to be acquired is a company which is not incorporated under any law in India. Section 29 of FERA provides that no foreign company or foreign national can acquire any share of an Indian company except with prior approval of the Reserve Bank of India. The Act has been amended to facilitate transfer of shares between two non-residents and to allow Indian companies to set up subsidiaries and joint ventures abroad without the prior approval of the Reserve Bank of
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Indian Companies Act, 1956: This has provisions specifically dealing with the amalgamation of a company or certain other entities with similar status. The most common form of merger involves an elaborate but time-bound procedure under sections 391 to 394 of the Act. An amalgamation is complete only after the court sanctions it and it takes effect after the order of the court is filed with the Registrar of
Companies
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Q. What is the scope for Merger’s and Acquisitions in India?
Mergers and acquisitions are a common phenomenon in a competitive and free economy and as India integrates into the world economy, there will be several opportunities for M&A deals both inside and outside India. In the context of the liberalised environment, M&As are emerging as a major business for the financial community. There are a host of factors propelling the Indian corporate sector to move towards the M&A arena, including existence of several domestic players seeking to consolidate their business by acquiring firms in their core areas and shedding
their non-core businesses. This trend is further supported by the presence of several foreign firms, which are looking to buy their way into the Indian market by acquiring existing plants and capacities.
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Q. What type of capital need do you address?
The investment advisory services by NCMPL include financing for growth, for leveraged buyouts and loan restructuring, and for special situations such as acquisitions, management buyouts, recapitalization, and bridge financing. |
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Q. How are the investments structured, when NCMPL takes the mandate as advisors?
Investments will be organized primarily in the form of equity investments or loans with equity features, such as warrants or conversion privileges, that entitle the funds to acquire a portion of the equity in the entity in which the investment are going to be made by the funds with whom NCMPL is going to
liaison on behalf of the clients.
I can't use your services but I might know a company that can. How can we work together?
We are in the process of adding able and capable consultants to work with us on to case basis on various projects. If you have a proposal and if you want to work with us please contact us with your details at
ncmpl@ncmpl.com.
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Term
Loan Syndication
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Q. How Does NCMPL provide assistance in loan procurement from financial institutions?
The NCMPL team has successfully defended project viability and technco-commercial feasibility during presentations to National and International Financial Institutions, on behalf of promoters. NCMPL provides end to end
personalised management services, which includes planning, advisory, execution and monitoring and follow-up. At present, NCMPL has unrivalled experience in arranging for project funding. Please email us, if you have specific requirements.
NCMPL helps in recognizing the purpose and income generating capacity of the business / projects for servicing principal and interest on a competitive basis. Other terms and conditions like period of loan, Margin and collateral is stipulated as per Bank's loan policy.
Large projects have normally more than one Financial Institution (FI) providing funds for them. For effective arrangement of funds and appraisal, NCMPL has expertise in considering loan syndication with leading Financial Institutions (FIs), like TFCI, SBI etc. The extent of financing is same as of term loan.
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Q. What is One Time Settlement?
NCMPL offers services for assisting in obtaining One Time Settlement for defaulting Companies for their Loans from Public Sector Banks as per relevant RBI Guidelines.
The Rural Planning & Credit Dept (RPCD) of RBI has set guidelines for one time settlement (OTS) of dues relating to chronic NPA’s below Rs.10 crore in the Small and Medium Enterprise (SME) sector, Department of Banking Operations and Development (DBOD) of RBI vide its letter dated November22, 2005 and RBI has advised that the guidelines may be implemented by all public sector banks.
Last Date for Notice to eligible defaulting borrowers to avail of OTS of their outstanding dues in terms of the guidelines is January 31, 2006, for Receipt of applications from borrowers is March 31, 2006, and for Processing under the revised guidelines is June 30, 2006.
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Q. What is Detailed Project Report Preparation?
Project Report Preparation services by NCMPL include Demand, Analysis and justification of the project. Basic requirements details such as land, fuel, water, infrastructure. Assistance in Site selection after examining the alternative sites for the plant. Property / plot plan and also preliminary equipment layout of main plant showing major equipment, handling facilities and service corridors. Technical description and brief specification of all major equipment and systems. Manpower planning and organizational set-up. Project implementation schedule showing key milestone activities and monitoring of activities. Estimation of project cost and broad break-up under major heads and phased expenditure over period of project execution. Computation of cost of generation at power plant bus based on mode of financing as indicated by Client. Submission of draft report, discussion with Client on same and updating report for final submission. NCMPL provides assistance in furnishing replies to question(s) and providing any additional information as may be required for approval of the project and sanction of the loans.
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Q. How does NCMPL assist in buying and selling of assets/business?
NCMPL’s Business purchase/sale division gives services for Valuation of businesses and intangible assets providing expert analysis of valuation issues for litigation, tax planning, and business transactions. Corporate valuation services provide scientifically supported valuations commanding respect from the other part. Through our extensive experience in business purchase/sales we try to guide you in the right direction to find the best situation to fit your preferences and interests.
NCMPL helps in diversifying your assets through business ownership. Acquisitions of existing businesses are at an all time high due to the immediate high returns and established business operations. Individuals, corporations and financial buyer groups are all actively scouring the Indian market for existing businesses. It is usually much safer and more profitable to buy an existing business than starting a new venture. |
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