September 14, 2018

India: RInfra’s power business sold to Adani

 

Source: www.mca.gov.in


Owing to the dynamism prevalent in the business domain, corporates face a lot of ups and downs. Business restructuring comes to rescue in this scenario. This is a comprehensive process be it financial or technological or market or organisational and may be executed in the form of mergers, acquisitions, takeovers, etc.

Selling of business

With a view to maximize profits and mitigate losses, sometimes the business entities may opt for selling their business to other entities. This may not necessarily bring an end to the business of the corporate structure. The sale of the business of a corporate may be in the terms of sale of entity or sale of an asset.

Advantages of business

sale Both the parties to the sale of the business are benefited by such transaction in the below stated manner:

  • Buyer’s perspective: A buyer is benefited by diminishing the occurrence of losses and avoidance of liabilities.

  • Seller’s perspective: A seller has the advantage in terms of payment of taxes at a low long-term capital gain rate, as compared to the higher ordinary income tax rate applicable on asset sales.

Mode of sale of business

The sale of business by transferring the same to other corporate entity is successfully completed by entering into a business transfer agreement between the parties which comprises of intent to sell, details regarding assets and liabilities, capital, contracts, customer lists, leases, employee insurance, new employment rights, inventory, tax issues, intellectual property, consideration for the sale, etc.

In the news…

Reliance Infrastructure Ltd. (hereinafter referred to as “RInfra”) completed the sale of its 100% shareholding in integrated Mumbai power distribution business to Adani Transmission Limited (hereinafter referred to as “ATL”) for INR 18,800 Crore.[1]

The integrated Mumbai power business includes the power generation units based at Dahanu, power transmission network across Mumbai in Mahrashtra, and the retail power distribution network in Mumbai suburbs.

The said transaction has been completed after having received approval from regulatory authorities including Competition Commission of India, shareholders of the company, Maharashtra Electricity Regulatory Commission, etc. The successful completion of the deal is expected to help the company reduce the debt to INR 7,500 crore from INR 22,000.

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[1] https://www.thehindu.com/business/Industry/rinfra-completes-sale-of-18800-crore-mumbai-power-business-to-adani/article24813068.ece

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