|
||||||||||||||||||||||||||
| SEC Info℠ | | | Home | | | Search | | | My Interests | | | Help | | | Sign In | | | Please Sign In | |||||||
|
||||||||||||||||||||||||||
As Of Filer Filing For·On·As Docs:Size Issuer Agent 10/28/10 Rediff Com India Ltd 6-K 10/28/10 4:161K RR Donnelley/FA |
Document/Exhibit Description Pages Size 1: 6-K Report of a Foreign Private Issuer HTML 15K 2: EX-99.1 Miscellaneous Exhibit HTML 37K 3: EX-99.2 Miscellaneous Exhibit HTML 37K 4: EX-99.3 Miscellaneous Exhibit HTML 54K
| Exhibit 99.3 |
| Bansi S. Mehta & Co | Fairness Report |
| Contents | |||
1. Introduction |
2 | ||
1.1 Background and Terms of Engagement |
2 | ||
1.2 “Vubites” |
2 | ||
2. Data Obtained |
3 | ||
3. Approach to Valuation |
4 | ||
4. Valuation and Conclusion |
6 | ||
5. Limitations and disclaimers |
7 | ||
6. Gratitude |
9 | ||
APPENDIX A : Statement of Assets and Liabilities as on 30.9.2010 |
10 | ||
APPENDIX B : Broad Summary of Data Obtained |
11 | ||
APPENDIX C : Steps for Valuation under The Discounted Cash Flow Method |
12 |
1
| Bansi S. Mehta & Co | Fairness Report |
| 1. | Introduction |
| 1.1 | Background and Terms of Engagement |
| 1.2 | “Vubites” |
| Age of the Business | Vubites commenced its operations in July 2010. The Company was incorporated on February 20, 2007 in India under the Companies Act, 1956. | |||||
| Nature of Business | Vubites is dedicated to bringing the power of TV advertising to small and local businesses. Vubites offers a suite of three web-based tools that help small businesses to advertise on TV: | |||||
• a tool to create TV ads for free, |
||||||
• a tool to plan and buy TV time to
match the geographical and socioeconomic
profile of their users a secure delivery
system to display these ads at the city and
sub-city level. |
||||||
| Capital | Authorised : 10,000,000 shares of Rs 1 each amounting to Rs 10 Million (USD 0.23 Million) | |||||
| Issued, Subscribed and paid up: 1,000,000 shares of Rs 1 each amounting to Rs 1 Million (USD 0.02 Million) | ||||||
Shareholding pattern
|
Promoters | 100 | % | |||
| FII | 0 | % | ||||
| Others | 0 | % | ||||
| Borrowings as on October 26, 2010 | Rs. 124.03 Million (USD 2.79 Million) | |||||
2
| Bansi S. Mehta & Co | Fairness Report |
| 2. | Data Obtained |
| 2.1 | We have called for and obtained such data, information, etc. as were necessary for the
purpose of our assignment, which have been made available to us by the Management of Rediff
and the Management of Vubites (“the Managements”) as the case may be. APPENDIX B hereto
broadly summarises the data obtained. |
| 2.2 | For the purpose of our assignment, we have relied on such data summarized in the said
Appendix and other related information and explanations provided to us in this regard; we have
not tried to establish the accuracy or otherwise thereof. |
3
| Bansi S. Mehta & Co | Fairness Report |
| 3. | Approach to Valuation |
| 3.1 | It is universally recognised that valuation is not an exact science and that estimating
values necessarily involves selecting a method or approach that is suitable for the purpose. |
| 3.2 | Ordinarily, when an upstart business is to be valued on a going concern basis it is
appropriate to compute the Enterprise Value thereof by discounting the future cash flows using
an appropriate rate of discounting. This method of valuation is popularly known as the
Discounted Cash Flows method. Therefore, for the purpose of assessing fairness of the
consideration, we have taken the present values of the future cash flows generated from the
operations of Vubites. The broad steps adopted for the valuation based on Discounted Cash
Flows method are given in APPENDIX C hereto. |
| 3.3 | In the event the business being valued has a track record of some time, it may also be
appropriate to look at the past performance to value such a business. Vubites being an upstart
company does not have a track record and, therefore, we could not place reliance on the
approach which considers the past operation for valuing a business. Also, based on the
information supplied by the Management, there is no other known existing business model as
that of Vubites in the Indian market. Therefore, we have not adopted the approach of relying
on the various historic financial measures to value Vubites. |
| 3.4 | In certain cases it may also be appropriate to look at the asset base of the business which
would involve both tangible and intangible assets deployed in the business. Normally the value
of the operating assets is based on the returns that the assets could generate. Even the
Discounted Cash Flows approach ascertains the value of the business on an overall basis
comprising all its tangible and intangible operating assets. Therefore, we have not separately
valued the tangible and intangible assets comprised in the business. |
| 3.5 | Further, if any non-operating assets are proposed to be acquired with the business the same
should be considered at their realizable value. In the context of Vubites we have found that
there are no non-operating assets. |
| 3.6 | Typically in valuing the shares of a company regard is also had to the percentage of equity
interest proposed to be acquired. In the event the acquisition is proposed to result in
acquiring |
4
| Bansi S. Mehta & Co | Fairness Report |
control, a premium may be added to the fair value. In the proposed acquisition, although,
effectively the control of the existing owner of Vubites would be diluted, since the
dilution would be in favour of public, we have not considered it appropriate to load control
premium. |
| 3.7 | Another important aspect for consideration in valuation is liquidity discounts. Based on our
experience we have adopted a liquidity discount of 25% for calculating the value of the equity
interest in Vubites. |
5
| Bansi S. Mehta & Co | Fairness Report |
| 4. | Valuation and Conclusion |
6
| Bansi S. Mehta & Co | Fairness Report |
| 5. | Limitations and disclaimers |
| 5.1. | Our valuation is based on the information furnished to us being complete and accurate in all
material respect. The same is based on the estimates of future financial performance as
projected by the Management, which represents their view of reasonable expectations at the
point in time when they were prepared, but such information and estimates are not offered as
assurances that the particular level of income or profit will be achieved or events will occur
as predicted. Actual results achieved during the period covered by the prospective financial
statements may vary from those contained in the statement and the variation may be material. |
| 5.2. | Our scope of work does not enable us to accept responsibility for the accuracy and
completeness of the information provided to us. We have, therefore, not performed any audit,
review or examination of any of the historical or prospective information used and therefore,
do not express any opinion with regard to the same. |
| 5.3. | The information presented in the Report does not reflect the outcome of any due diligence
procedures. The reader is cautioned that the outcome of that process could change the
information herein and, therefore, the valuation materially. |
| 5.4. | The Report is meant for the purpose mentioned in Para 1.1 and should not be used for any
purpose other than the purpose mentioned therein. The Report should not be copied or
reproduced without obtaining our prior written approval for any purpose other than the purpose
for which it is prepared. |
| 5.5. | The projected working results are those as prepared by the Management and furnished to us for
the purposes of the Report. Although, we have reviewed the underlying assumptions and
parameters, we accept no responsibility for them, or the ultimate accuracy and realization of
the forecasts. |
7
| Bansi S. Mehta & Co | Fairness Report |
| 5.6. | We have relied on the judgment made by the Management and, accordingly, our valuation does
not consider the assumption of contingent liabilities materialising (other than those
specified by the Management and the Auditors). If there were any omissions, inaccuracies or
misrepresentations of the information provided by the Management, then this may have the
effect on our valuation computations. |
| 5.7. | No investigation of the Company’s claim to title of assets has been made for the purpose of
this valuation and their claim to such rights has been assumed to be valid. No consideration
has been given to liens or encumbrances against the assets, beyond the loans disclosed in the
accounts. Therefore, no responsibility is assumed for matters of a legal nature. The report is
not, nor should it be construed, as our opining or certifying the compliance with the
provisions of any law including company and taxation laws or as regards any legal, accounting
or taxation implications or issues. |
| 5.8. | Any person/ party intending to provide finance / deal in the shares / business of any of the
Companies shall do so after seeking their own professional advice and after carrying out their
own due diligence procedures to ensure that they are taking an informed decision. |
| 5.9. | We have relied upon the written representations received from the Management that the
information contained in this Report is materially accurate and complete, fair in the manner
of its portrayal and therefore forms a reliable basis for the valuation. |
| 5.10. | Our valuation is based on the market conditions and the regulatory environment that
currently exist. However, changes to the same in the future could impact the Company valued
by us and the industry it operates in, which may impact our valuation. |
| 5.11. | We have no obligation to update this Report because of events or transactions occurring
subsequent to the date of this Report. |
| 5.12. | The amounts in Rupees mentioned in this Report are converted to US Dollar (“USD”) using the
conversion rate of Rs.44.43 per 1 USD prevailing as on the Date of the Report unless
specifically mentioned otherwise. |
8
| Bansi S. Mehta & Co | Fairness Report |
| 6. | Gratitude |
Mumbai |
||||
Dated: 27 OCT 2010
|
/s/ BANSI S. MEHTA & CO.
|
9
| Bansi S. Mehta & Co | Fairness Report |
| Amount | Amount 1 | |||||||
| (in Rs. | (in USD | |||||||
| Particulars | Million) | Million) | ||||||
Sources of Funds |
||||||||
Share Capital |
1.00 | 0.02 | ||||||
Reserve and Surplus |
(2.20 | ) | (0.05 | ) | ||||
Unsecured Loans |
122.50 | 2.73 | ||||||
Total |
121.30 | 2.70 | ||||||
Application of Funds |
||||||||
Fixed Assets |
||||||||
Gross Block |
134.20 | 2.99 | ||||||
Accumulated Depreciation |
(13.60 | ) | (0.30 | ) | ||||
Net Block |
120.70 | 2.69 | ||||||
Current Assets, Loans and Advances |
||||||||
Cash |
2.60 | 0.06 | ||||||
Debtors |
0.00 | 0.00 | ||||||
Security Deposit |
1.00 | 0.02 | ||||||
Prepaid Expenses |
0.00 | 0.00 | ||||||
Prepaid Taxes |
0.00 | 0.00 | ||||||
Advance recovered cash or kind |
0.30 | 0.01 | ||||||
Total of Current Assets (a) |
3.90 | 0.09 | ||||||
Current Liabilites |
||||||||
Creditors |
1.10 | 0.02 | ||||||
Other Liabilities |
2.50 | 0.06 | ||||||
Total of Current Liabilities(b) |
3.60 | 0.08 | ||||||
Net Current Assets( (a)-(b) ) |
0.30 | 0.01 | ||||||
Deferred Tax Asset |
0.30 | 0.01 | ||||||
Total |
121.30 | 2.70 | ||||||
| 1 | Amounts in Rupees have been converted to USD using the
conversion rate of Rs.44.92 per 1 USD as on September 29, 2010. |
10
| Bansi S. Mehta & Co | Fairness Report |
| 1. | Projected Financial Statements of Vubites (with assumptions) for the period
October 31, 2010 to December 31, 2010 and for future five calendar years i.e. for the
year ending December 31, 2011 to December 31, 2015. |
|
| 2. | Financial Statements of Vubites for the past financial years from March 31,
2007 to March 31, 2010. (The company was incorporated on February 20, 2007). |
|
| 3. | The Memorandum and Articles of Association of Vubites. |
|
| 4. | The returns of income filed with the Income Tax Department as per the Income
Tax Act, 1961 for AY- 2007-08 and AY-2010-11. |
|
| 5. | Agreement of Vubites with Broadcaster, Multi System Operators and Software
Developer. |
|
| 6. | Certified True Copy of the Resolution passed at the meeting of the Board of
Directors of Rediff held on October 26, 2010. |
|
| 7. | Answers to specific questions and issues raised by us after examining the
foregoing data. |
11
| Bansi S. Mehta & Co | Fairness Report |
| 1. | Considered projected cash profits of Vubites before interest for the future
five years as provided to us. |
|
| 2. | These cash profits have been adjusted by capital outlays as also increase or
decrease in working capital and the income tax likely to be paid so as to arrive at the
Free Cash Flows available in the respective future years. |
|
| 3. | The amount of the Free Cash Flow in the 5th year and the rate of
fall in growth in cash flows during the projected period is taken as the basis for
building free cash flows for 6th, 7th and 8th years.
Cash flow for the 8th year is considered as the perpetual cash flow. |
|
| 4. | Perpetuity Value is calculated on the basis of the perpetual cash flow and the
weighted average cost of capital as adjusted for perpetual growth of 3% and is added to
the Free Cash Flow of the 7th year. |
|
| 5. | The Free Cash Flows for the estimated period of seven years including
Perpetuity Value arrived at as described above is discounted adopting an appropriate
discounting factor to arrive at the Net Present Value (“NPV”) thereof. |
|
| 6. | The NPV so arrived at for each year is aggregated to derive the Enterprise
Value of Vubites. |
|
| 7. | The Enterprise value so arrived at is reduced by the amount of borrowings of
Vubites as on the Report Date. The value so arrived at is the Business Value or Equity
Value of Vubites. |
|
| 8. | Such Business Value or Equity Value is further discounted by 25% to provide for
non-liquidity attached to the equity shares of Vubites. |
12
| This ‘6-K’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/15 | ||||
| 12/31/11 | ||||
| 12/31/10 | ||||
| 10/31/10 | ||||
| Filed on / For Period End: | 10/28/10 | |||
| 10/26/10 | ||||
| 9/29/10 | ||||
| 3/31/10 | 20-F | |||
| 3/31/07 | 20-F | |||
| 2/20/07 | ||||
| List all Filings | ||||
