Advisors on Disinvestment
The Global Advisor will advise the Government on all aspects of privatization transactions, including the strategic options open to it for privatization.The responsibilities of the advisor, would inter-alia, cover rendering of advice and assisting government in the disinvestment of the PSU, suggesting measures to enhance sale value, preparing a detailed information memorandum, marketing of the offer, inviting the evaluating the bids, assisting during negotiations with prospective buyers, drawing up the sale/other agreements and advising on post-sale matters.
Procedure for selection of Global Advisor :
- The Government will write a brief Terms of Reference (TOR) for the advisor and invite expressions of interest (EOIs).
- All advisors who submit EOIs will be asked to make a presentation before the Committee comprising Principal Secretary Finance as Chairman, Director Disinvestment as Convenor and Administrative Secretary and Managing Director of the concerned PSU as other members.
- The advisors offering the best technical terms will be pre-qualified and their financial bids opened on the date of presentation itself, in their presence.
- The pre-qualified advisor with the lowest financial bid on success fee will be hired to implement the privatization transaction.
- The fees payable to the Advisors will consist of two components.The first component to be called 'success fee' will be a fixed percentage as per bid, of the gross proceeds to be received by the Government from disinvestment.
- The other component of the fee will be the 'drop-dead-fee', which will be a lump sum amount payable to the advisor only in the event of the transaction being called off by the Government.
Terms of Reference
Engagement of an Advisor for Disinvestment through .
The Government of Punjab (GOP) intends to disinvest through ... (Details of the company)The responsibilities of the Advisor would, inter alia, cover rendering of advice and assisting GOP in the disinvestment of (the company),suggesting measures to enhance sale value, preparing a detailed information memorandum, marketing the proposition, inviting and evaluating the bids, assisting during the negotiations with prospective bidders, drawing up the necessary agreements and advising on post sale matters.The interested bidders may submit their Expression of interest to act as theAdvisor, singly or as a consortium, for disinvestment of Government of Punjab shareholding in (the company) positively by the ., 2002 by 1700 hours(IST) with the following details:
Full particulars of the constitution, ownership and main business activities of the prospective Advisor (bidder). 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.
Unabridged Annual Reports or audited financial accounts for the last three years (in case of consortium of all the partners).
Details of the pending litigation and contingent liabilities, if any,that could affect the performance of the bidder under the mandate, as alsodetails of any past conviction and pending litigation against sponsors/partners and any areas of possible conflicts of interest.
Note: The above particulars should be provided year-wise (wherever applicable)for the last three years.
Government of India has issued 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 as Appendix.You are requested to carefully go through the guidelines and after satisfying yourself that you are qualified to act as Advisor, furnish the following certificate as a part of the proposal.
"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 or our concern or of our sister concern.It is certified that no conflict of interest exists as on date and in future such a conflict of interest arises we will intimate the Government of the same".
The short listed bidders would be required to demonstrate their credentials before a Committee through a presentation, covering the areas / criteria listed below, and to bring along 15 copies of the presentation, at the time of presentation:
Presence in India, including number of offices, manpower, funds deployed,period etc. and the level of commitment in India.
Details of similar transaction (Government, Quasi Government and Private Sector, separately) executed/under execution by the bidder in a similar sector/industry. This should cover the role played by the bidder in deal structuring, valuation, transaction marketing, preparation of information and sale memorandum, shareholders agreement, etc. and bid evaluation and negotiations.
Experience in capital market transactions, (both equity and debt), in the Government, Quasi Government and Private Sectors, separately, indicating the number of deals executed and quantum of funds raised.
Expertise, including research coverage and capabilities in the concerned industry and an understanding of NIL including a SWOT analysis incorporating key selling points and limitations.
Proposed methodologies of the Disinvestment, including;
- Valuation of (the company) (excluding Asset Valuation of (the company))
- Transaction structuring
- Marketing Strategy.
- Bid evaluation methodology
- Tentative time-frame
Details of deal team;
- Experience and qualifications
- Team members located abroad
- Team members located in India
The presentations by the shortlisted bidders will take place before a Committee of the Core Group. The date, time and venue for the presentation will be communicated later.
The bidders are required to submit at the time of presentation sealed financial bids incorporating the fee chargeable as a percentage of the sale proceeds from the disinvestment of the GoP stake in (the company), gross of all taxes. The bid should be unconditional.
Expenditure on account of fees to legal/accounting or any other consultant, if appointed by GOP and/ or (the company) should not be included in the financial bid. The travel related expenses and all the other expenses including those related to due diligence would have to be borne by the Advisor.
The financial bid should also indicate a lump sum amount to be charged as drop dead fee, which would be payable if the GOP wants to call-off the transaction. Interested bidders are required to deposit along with their Expression of Interest a non-refundable earnest fee of INR 20,000 (Rupees twenty thousand only) or US $ equivalent, by way of a Demand Draft payable at Chandigarh in favour of ... GOP reserves the sole right to reject any or all Expressions of interest without assigning any reasons therefor. The Expression of interest should be sent to, by ., 2002, and further clarifications, if any, may be sought from:
Government of India
Department of Disinvestment
Block 14, CGO Complex
Dated 13th July, 2001.
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 arties 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:-.
- 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 relevantlegal 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
- 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.
- Disqualification shall continue for a period that Government deem appropriate.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.